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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended June 30, 2025

OR

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

For the transition period from to

Commission file number: 001-35774

INNODATA INC.

(Exact name of registrant as specified in its charter)

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)

(201) 371-8000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☑ Smaller reporting company ☑ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of outstanding shares of the registrant’s common stock, $0.01 par value per share, as of July 24, 2025 was 31,845,622.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

For the Quarter Ended June 30, 2025

INDEX

	Part I – Financial Information
		Page No.
Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024	2
	Condensed Consolidated Statements of Operations and Comprehensive Income (loss) for the three months ended June 30, 2025 and 2024	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the six months ended June 30, 2025 and 2024	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

	Part II – Other Information

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures		44

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	June 30,		December 31,
	2025		2024
ASSETS
Current assets:
Cash and cash equivalents	$	59,792	$	46,897
Accounts receivable, net of allowance for credit losses		34,124		28,013
Prepaid expenses and other current assets		6,773		6,090
Total current assets		100,689		81,000
Property and equipment, net		4,710		4,101
Right-of-use-asset, net		3,830		4,238
Other assets		1,342		1,267
Deferred income taxes, net		6,036		7,492
Intangibles, net		13,930		13,353
Goodwill		2,086		1,998
Total assets	$	132,623	$	113,449

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,491	$	4,554
Accrued expenses		5,144		4,891
Accrued salaries, wages and related benefits		12,377		13,836
Deferred revenues		6,485		8,010
Income and other taxes		4,220		5,695
Long-term obligations - current portion		1,477		1,643
Operating lease liability - current portion		928		877
Total current liabilities		35,122		39,506
Deferred income taxes, net		71		32
Long-term obligations, net of current portion		7,493		6,744
Operating lease liability, net of current portion		3,295		3,778
Total liabilities		45,981		50,060
Commitments and contingencies		-		-

STOCKHOLDERS’ EQUITY:
Serial preferred stock; 4,998,000 shares authorized, none issued and outstanding		-		-
Common stock, $.01 par value; 75,000,000 shares authorized; 35,029,000 shares issued and 31,845,000 outstanding at June 30, 2025 and 34,484,000 shares issued and 31,300,000 outstanding at December 31, 2024		350		345
Additional paid-in capital		60,150		53,085
Retained earnings		33,983		18,977
Accumulated other comprehensive loss		(1,293)		(2,470)
		93,190		69,937
Less: treasury stock, 3,184,000 shares at June 30, 2025 and December 31, 2024, at cost		(6,465)		(6,465)
Stockholders’ equity Innodata Inc. and subsidiaries		86,725		63,472
Non-controlling interests		(83)		(83)
Total Stockholders’ equity		86,642		63,389
Total liabilities and stockholders’ equity	$	132,623	$	113,449

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended
	June 30,
	2025		2024
Revenues	$	58,393	$	32,553
Direct operating costs		35,370		23,202
Selling and administrative expenses		14,112		9,020
Interest expense (income), net		(577)		55
		48,905		32,277
Income before provision for income taxes		9,488		276

Provision for income taxes		2,269		285
Consolidated net income (loss)		7,219		(9)
Income attributable to non-controlling interests		-		5
Net Income (loss) attributable to Innodata Inc. and Subsidiaries	$	7,219	$	(14)

Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	0.23	$	(0.00)
Diluted	$	0.20	$	(0.00)

Weighted average shares outstanding:
Basic		31,785		28,878
Diluted		35,301		28,878

Comprehensive Income (Loss):
Consolidated net income (loss)	$	7,219	$	(9)
Pension liability adjustment, net of taxes		(35)		-
Foreign currency translation adjustment		582		(78)
Change in fair value of derivatives, net of taxes		248		(174)
Other comprehensive income (loss)		795		(252)
Total comprehensive income (loss)		8,014		(261)
Comprehensive income attributed to non-controlling interest		-		5
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries	$	8,014	$	(266)

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share amounts)


	Six Months Ended
	June 30,
	2025		2024
Revenues	$	116,737	$	59,057
Direct operating costs		70,462		40,071
Selling and administrative expenses		29,092		17,325
Interest income, net		(704)		(29)
		98,850		57,367
Income before provision for income taxes		17,887		1,690
Provision for income taxes		2,881		709
Consolidated net income		15,006		981
Income attributable to non-controlling interests		-		6
Net Income attributable to Innodata Inc. and Subsidiaries	$	15,006	$	975

Income per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	0.47	$	0.03
Diluted	$	0.43	$	0.03

Weighted average shares outstanding:
Basic		31,609		28,819
Diluted		35,120		32,691


Comprehensive Income:
Consolidated net income	$	15,006	$	981
Pension liability adjustment, net of taxes		(36)		(1)
Foreign currency translation adjustment		691		(208)
Change in fair value of derivatives, net of taxes		522		(208)
Other comprehensive income (loss)		1,177		(417)
Total comprehensive income		16,183		564
Comprehensive income attributed to non-controlling interest		-		6
Comprehensive income attributable to Innodata Inc. and Subsidiaries	$	16,183	$	558

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended
	June 30,
	2025		2024
Cash flows from operating activities:
Consolidated net income	$	15,006	$	981
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Stock-based compensation		5,602		2,026
Depreciation and amortization		3,164		2,684
Deferred income taxes		1,355		41
Pension cost		672		395
Changes in operating assets and liabilities:
Accounts receivable		(5,716)		(3,976)
Prepaid expenses and other current assets		(387)		246
Other assets		(76)		396
Accounts payable and accrued expenses		26		3,348
Deferred revenues		(1,525)		1,247
Accrued salaries, wages and related benefits		(1,490)		(1,149)
Income and other taxes		(1,529)		74
Net cash provided by operating activities		15,102		6,313

Cash flows from investing activities:
Capital expenditures		(4,058)		(4,067)
Net cash used in investing activities		(4,058)		(4,067)

Cash flows from financing activities:
Proceeds from exercise of stock options		1,468		783
Withholding taxes on net settlement of restricted stock units		-		(97)
Payment of long-term obligations		(229)		(294)
Net cash provided by financing activities		1,239		392

Effect of exchange rate changes on cash and cash equivalents		612		65

Net increase in cash and cash equivalents		12,895		2,703

Cash and cash equivalents, beginning of period		46,897		13,806
Cash and cash equivalents, end of period	$	59,792	$	16,509

Supplemental disclosures of cash flow information:
Shares withheld for withholding taxes on net settlement for restricted stock	$	-	$	97
Cash paid for income taxes	$	2,670	$	459
Cash paid for operating leases	$	718	$	719
Cash paid for interest	$	20	$	169

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024

(Unaudited)

(In thousands)


								Accumulated
				Additional				Other					Non-
	Common Stock			Paid-in		Retained		Comprehensive		Treasury Stock			Controlling
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Interest		Total
January 1, 2025	34,484	$	345	$	53,085	$	18,977	$	(2,470)	(3,184)	$	(6,465)		(83)	$	63,389
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		7,787		-	-		-		-		7,787
Stock-based compensation	-		-		2,881		-		-	-		-		-		2,881
Stock option exercises	261		2		961		-		-	-		-		-		963
Issuance of restricted stock units	184		2		(2)		-		-	-		-		-		-
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		-		(1)
Foreign currency translation adjustment	-		-		-		-		109	-		-		-		109
Change in fair value of derivatives, net of taxes	-		-		-		-		274	-		-		-		274
March 31, 2025	34,929	$	349	$	56,925	$	26,764	$	(2,088)	(3,184)	$	(6,465)	$	(83)	$	75,402
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		7,219		-	-		-		-		7,219
Stock-based compensation	-		-		2,721		-		-	-		-		-		2,721
Stock option exercises	92		1		504		-		-	-		-		-		505
Issuance of restricted stock units	8		-		-		-		-	-		-		-		-
Pension liability adjustments, net of taxes	-		-		-		-		(35)	-		-		-		(35)
Foreign currency translation adjustment	-		-		-		-		582	-		-		-		582
Change in fair value of derivatives, net of taxes	-		-		-		-		248	-		-		-		248
June 30, 2025	35,029	$	350	$	60,150	$	33,983	$	(1,293)	(3,184)	$	(6,465)	$	(83)	$	86,642

January 1, 2024	31,937	$	320	$	43,152	$	(9,683)	$	(1,621)	(3,184)	$	(6,465)	$	(708)	$	24,995
Net income attributable to Innodata Inc. and Subsidiaries	-		-		-		989		-	-		-		-		989
Income attributable to non-controlling interests	-		-		-		-		-	-		-		1		1
Stock-based compensation	-		-		1,034		-		-	-		-		-		1,034
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		-		(1)
Foreign currency translation adjustment	-		-		-		-		(130)	-		-		-		(130)
Change in fair value of derivatives, net of taxes	-		-		-		-		(34)	-		-		-		(34)
March 31, 2024	31,937	$	320	$	44,186	$	(8,694)	$	(1,786)	(3,184)	$	(6,465)	$	(707)	$	26,854
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(14)		-	-		-		-		(14)
Stock-based compensation	-		-		992		-		-	-		-		-		992
Income attributable to non-controlling interests	-		-		-		-		-	-		-		5		5
Stock option exercises	235		2		781		-		-	-		-		-		783
Shares withheld for restricted stock unit net settlement	-		-		(97)		-		-	-		-		-		(97)
Pension liability adjustments, net of taxes	-		-		-		-		-	-		-		-		-
Foreign currency translation adjustment	-		-		-		-		(78)	-		-		-		(78)
Change in fair value of derivatives, net of taxes	-		-		-		-		(174)	-		-	$	-		(174)
June 30, 2024	32,172	$	322	$	45,862	$	(8,708)	$	(2,038)	(3,184)	$	(6,465)	$	(702)	$	28,271

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Summary of Significant Accounting Policies and Estimates

Basis of Presentation - The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the consolidated financial position of Innodata Inc. (including its subsidiaries, the “Company”) as of June 30, 2025 and December 31, 2024, the results of its operations and comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024, cash flows for the six months ended June 30, 2025 and 2024, and stockholders’ equity for the three and six months ended June 30, 2025 and 2024. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

Certain information and note disclosures normally included in or with financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the notes to the consolidated financial statements for the year ended December 31, 2024.

Principles of Consolidation - The condensed consolidated financial statements include the accounts of Innodata Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates - In preparing the condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are reasonable. Actual results could differ from those estimates. Significant estimates include those related to the allowance for credit losses and billing adjustments, useful life of long-lived assets, useful life of intangible assets, impairment of goodwill and intangible assets, valuation of deferred tax assets, valuation of stock-based compensation, pension benefit plan assumptions, litigation accruals and estimated accruals for various tax exposures.

Concentration of Credit Risk - The Company maintains its cash with highly rated financial institutions, located in the United States and in foreign locations where the Company has its operations. At June 30, 2025, the Company had cash and cash equivalents of $59.8 million, of which $16.4 million was held by its foreign subsidiaries and $43.4 million was held in the United States. To the extent that such cash exceeds the maximum insurance levels, the Company is uninsured. The Company has not experienced any losses in such accounts.

Accounts Receivable - Accounts receivable is generally recorded at the invoiced amounts, net of an allowance for expected losses. The Company establishes credit terms for new customers based upon management’s review of their credit information and project terms, and performs ongoing credit evaluations of its customers, adjusting credit terms when management believes appropriate based upon payment history and an assessment of the customer’s current creditworthiness.

The Company records an allowance for credit losses for estimated losses resulting from the failure of our customers to make the required payments and provisions for billing adjustments relating to quality issues on delivered services, service penalties, discounts and price adjustments. The allowance for credit losses is based on a review of specifically identified accounts and an overall aging analysis applied to accounts pooled based on similar risk characteristics. Judgments are made with respect to the collectability of accounts receivable within each pool based on historical experience, current payment practices, and current economic trends based on our expectations over the expected life of the receivables, generally ninety days or less. Actual credit losses could differ from those estimates.

Revenue Recognition - The Company’s revenue is recognized when services are rendered or goods are delivered to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services or goods as per the agreement with the customer. In cases where there are agreements with multiple performance obligations, the Company identifies each performance obligation and evaluates whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. For agreements with distinct performance obligations, the Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation, if any, and then evaluates how the services are performed for the customer to determine the timing of revenue recognition.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For the Digital Data Solutions segment, revenue is recognized primarily based on the quantity delivered or resources utilized in the period in which services are performed and performance conditions are satisfied as per the agreement. Revenue from agreements billed on a time-and-materials basis is recognized as services are performed. Revenue from fixed-fee agreements, which is not significant to overall revenues, is recognized based on the proportional performance method of accounting, as services are performed, or milestones are achieved.

For the Synodex segment, revenue is recognized primarily based on the quantity delivered in the period in which services are performed and performance conditions are satisfied as per the agreement. A portion of the Synodex segment revenue is derived from licensing the Company’s functional software and providing access to the Company’s hosted software platform. Revenue from such services is recognized monthly when all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; access to the service is provided to the end user; and collection is probable.

The Agility segment derives its revenue primarily from subscription arrangements and provision of enriched media analysis services. It also derives revenue as a reseller of corporate communication solutions. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user; all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; and collection is probable. Revenue from enriched media analysis services is recognized when the services are performed, and performance conditions are satisfied. Revenue from reseller agreements is recognized at the gross amount received for the goods in accordance with the Company functioning as a principal due to the Company meeting the following criteria: the Company acts as the primary obligor in the sales transaction; assumes the credit risk; sets the price; can select suppliers; and is involved in the execution of the services, including after sales service.

Revenue includes reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs.

Revenue associated with the services provided in one period and billed in a subsequent period is commonly referred to as unbilled revenues and is included under Accounts receivable.

The Company considers U.S. GAAP criteria for determining whether to report gross revenue as a principal versus net revenue as an agent. The Company evaluates whether it is in control of the services before the same are transferred to the customer to assess whether it is principal or agent in the arrangement.

Contract acquisition costs, which are included in prepaid expenses and other current assets, are amortized over the term of a subscription agreement or contract that normally has a duration of 12 months or less. The Company reviews these prepaid acquisition costs on a periodic basis to determine the need to adjust the carrying values for early terminated contracts. Included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets are contract acquisition costs amounting to $1.0 million and $1.1 million as of June 30, 2025 and December 31, 2024, respectively. These acquisition costs relate to our Agility segment and are amortized over the term of the subscription agreement.

Foreign Currency Translation - The functional currency of the Company’s subsidiaries in the Philippines, India, Sri Lanka, Israel, Hong Kong, the United Kingdom and Canada (other than the Agility subsidiaries) is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees, Israeli shekels, United Kingdom Pound Sterling and Canadian dollars are translated to U.S. dollars at rates which approximate those in effect on the transaction dates. Monetary assets and all liabilities denominated in foreign currencies on June 30, 2025 and December 31, 2024 are translated at the exchange rate in effect as of those dates. Non-monetary assets and stockholders’ equity are translated at the appropriate historical rates. Included in direct operating costs were foreign exchange (gains) losses resulting from such transactions of approximately $0.2 million and ($0.4) million for the three months ended June 30, 2025 and 2024, and $0.3 million and ($0.3) million for the six months ended June 30, 2025 and 2024, respectively.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The functional currency for the Company’s subsidiary in Germany is the Euro. The functional currencies for the Company’s Agility subsidiaries in the United Kingdom and Canada are the Pound Sterling and the Canadian dollar, respectively. The financial statements of these subsidiaries are prepared in their respective currencies. Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in the Company’s condensed consolidated financial statements. Income, expenses, and cash flows are translated at weighted-average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income or loss in stockholders’ equity. Foreign exchange transaction gains or losses are included in direct operating costs in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

Derivative Instruments - The Company accounts for derivative transactions in accordance with the FASB’s Accounting Standards Codification (“ASC”) Topic 825, “Financial Instruments”. For derivative instruments that are designated and qualify as cash flow hedges, the entire change in fair value of the hedging instrument is recorded in other comprehensive income (loss). When the amounts recorded in other comprehensive income (loss) are reclassified to earnings, they are included as part of direct operating costs. For derivative instruments that are not designated as hedges, any change in fair value is recorded directly in earnings as part of direct operating costs.

Capitalized Developed Software - The Company incurs development costs related to software it develops for its internal use. Qualifying costs incurred during the application development stage are capitalized. These costs primarily consist of internal labor and third-party development costs and are amortized using the straight-line method over the estimated useful life of the capitalized developed software, which generally ranges from three to ten years. All other research and maintenance costs are expensed as incurred. Capitalized developed software in progress was $4.9 million and $3.6 million as of June 30, 2025 and December 31, 2024, respectively. The cumulative completed capitalized developed software was $19.9 million and $19.8 million as of June 30, 2025 and December 31, 2024, respectively.

Income Taxes - Estimated deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates, as well as any net operating loss or tax credit carryforwards expected to reduce taxes payable in future years. A valuation allowance is provided when it is more likely than not that all or some portion of the estimated deferred tax assets will not be realized. While the Company considers future taxable income in assessing the need for the valuation allowance, in the event that the Company anticipates that it will be able to realize the estimated deferred tax assets in the future in excess of its net recorded amount, an adjustment to the provision for deferred tax assets would increase income in the period such determination was made. Similarly, in the event that the Company anticipates that it will not be able to realize the estimated deferred tax assets in the future considering future taxable income, an adjustment to the provision for deferred tax assets would decrease income in the period such determination was made. Changes in the valuation allowance from period to period are included in the Company’s tax provision in the period of change. The Company indefinitely reinvests the foreign earnings in its foreign subsidiaries. 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.

In assessing the realization of deferred tax assets, management considered whether it is more likely than not that all or some portion of the deferred tax assets of subsidiaries in Canada and Germany will be realizable or not.

In the first quarter of 2025, the Company assessed one of its Canadian subsidiaries and the assessment yielded positive evidence enabling the release of the valuation allowance for the Canadian deferred tax assets of the subsidiary under “ASC Topic 740-30-22 – Accounting for Income Taxes”.

In the second quarter of 2025, the Company assessed its German subsidiary and the assessment yielded positive evidence enabling the release of the valuation allowance for the German deferred tax assets of the subsidiary under “ASC Topic 740 - 30 - 22 - Accounting for Income Taxes”.

As the expectation of future taxable income of the second Canadian subsidiary cannot be predicted with reasonable accuracy, the Company continues to maintain a valuation allowance against the deferred tax assets of this subsidiary.

The Company accounts for income taxes regarding uncertain tax positions and recognizes interest and penalties related to uncertain tax positions in income tax expense in the condensed consolidated statements of operations and comprehensive income.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Deferred Revenue - Deferred revenue represents payments received from customers in advance of providing services and amounts deferred if conditions for revenue recognition have not been met. The Company expects to recognize substantially all of these performance obligations over the next 12 months. The table below summarizes the deferred revenue balances as of June 30, 2025 and December 31, 2024 (in thousands):


	June 30,		December 31,
	2025		2024
Deferred revenues	$	6,485	$	8,010

The table below provides information about contract liabilities (deferred revenue) and the changes in the balances for the three and six months ended as of June 30, 2025 and 2024 were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Balance at the beginning of period	$	8,028	$	6,668	$	8,010	$	3,523
Net deferred revenue in the period		6,110		580		12,575		15,316
Revenue recognized		(8,001)		(2,467)		(14,608)		(13,957)
Currency translations and other adjustments		348		(11)		508		(112)
Balance at the end of period	$	6,485	$	4,770	$	6,485	$	4,770

Recently Issued Accounting Pronouncements Not Yet Adopted - On December 14, 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The effective date of this ASU is for fiscal years beginning after December 15, 2024 and interim periods beginning after December 15, 2025. The adoption of ASU 2023-09 will enhance quantitative and qualitative disclosures related to rate reconciliation of significant components and income tax paid. The Company does not anticipate any material impact from the adoption of this new standard.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), fourth amendment via ASU 2025-01: Disaggregation of Income Statement Expenses”. ASU No. 2024-03 does not change or remove existing expense disclosure requirements but requires disaggregated disclosures about certain expense categories and captions, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. ASU No. 2024-03 will be effective for the Company starting in fiscal year 2027, and for interim financial reporting beginning in the first quarter of fiscal year 2028. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the Company’s disclosures within the consolidated financial statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2.Accounts Receivable

Accounts receivable consists of the following (in thousands):


	June 30,		December 31,
	2025		2024
Gross Accounts receivable	$	35,681	$	29,772
Allowance for credit losses		(1,274)		(1,256)
Allowance for billing adjustments		(283)		(503)
Accounts receivable, net	$	34,124	$	28,013

Activity in the allowance for the credit losses for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Balance at beginning of period	$	1,205	$	1,000	$	1,256	$	992
Additions charged to expense		79		91		79		106
Write-offs against allowance		(16)		(10)		(71)		(17)
Foreign currency translation adjustment		6		-		10		-
Balance at end of period	$	1,274	$	1,081	$	1,274	$	1,081

3.Goodwill and Intangible Assets

Goodwill

The change in the carrying amount of goodwill for the six months ended June 30, 2025 was as follows (in thousands):


Balance - January 1, 2025	$	1,998
Foreign currency translation adjustment		88
Balance - June 30, 2025	$	2,086

The fair value measurement of goodwill of the Agility segment was conducted on September 30, 2024 and was classified within Level 3 of the fair value hierarchy because the Company used the income approach, which utilizes significant inputs that are unobservable in the market and the market multiple approach using comparable entities to further validate the carrying values. The Company believes it made reasonable estimates and assumptions to calculate the fair value of the reporting unit as of the impairment test measurement date. The carrying value of Goodwill was $2.1 million and $2.0 million for the periods ended June 30, 2025 and December 31, 2024.

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Intangibles

Information regarding the Company acquired intangible assets and capitalized developed software was as follows (in thousands):


	June 30, 2025
					Foreign
	Gross				Currency		Net
	Carrying		Accumulated		Translation		Carrying
	Value		Amortization		Adjustment		Value
Acquired Intangible Assets
Developed technology	$	2,881	$	(2,784)	$	4	$	101
Customer relationships		1,965		(1,789)		10		186
Trademarks and tradenames		840		(820)		1		21
Patents		40		(40)		-		-
Media Contact Database		3,528		(3,177)		17		368
Total Acquired Intangible Assets	$	9,254	$	(8,610)	$	32	$	676

Capitalized Developed Software
Capitalized Developed Software	$	19,940	$	(11,845)	$	253	$	8,348
Capitalized Developed Software - in Progress		4,899		-		7		4,906
Total Capitalized Developed Software	$	24,839	$	(11,845)	$	260	$	13,254

Total	$	34,093	$	(20,455)	$	292	$	13,930


	December 31, 2024
					Foreign
	Gross				Currency		Net
	Carrying		Accumulated		Translation		Carrying
	Value		Amortization		Adjustment		Value
Acquired Intangible Assets
Developed technology	$	3,060	$	(2,911)	$	(3)	$	146
Customer relationships		2,144		(1,856)		(29)		259
Trademarks and tradenames		862		(826)		-		36
Patents		44		(44)		-		-
Media Contact Database		3,546		(3,016)		(1)		529
Total Acquired Intangible Assets	$	9,656	$	(8,653)	$	(33)	$	970

Capitalized Developed Software
Capitalized Developed Software	$	19,811	$	(10,507)	$	(463)	$	8,841
Capitalized Developed Software - in Progress		3,552		-		(10)		3,542
Total Capitalized Developed Software	$	23,363	$	(10,507)	$	(473)	$	12,383

Total	$	33,019	$	(19,160)	$	(506)	$	13,353

Amortization expense relating to acquired intangible assets was $0.2 million for each of the three-month periods ended June 30, 2025 and 2024. Amortization expense relating to acquired intangible assets was $0.4 million for each of the six-month periods ended June 30, 2025 and 2024.

Amortization expense relating to capitalized developed software was $0.9 million and $0.8 million for the three months ended June 30, 2025 and 2024, respectively. Amortization expense relating to capitalized developed software was $1.9 million and $1.6 million for the six months ended June 30, 2025 and 2024, respectively.

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As of June 30, 2025, estimated future amortization expense for intangible assets was as follows (in thousands):


Year	Amortization
2025	$	3,828
2026		4,950
2027		3,498
2028		843
2029		516
Thereafter		295
	$	13,930

4.Income Taxes

For the six months ended June 30, 2025, the Company recorded an income tax provision of approximately $2.9 million. The provision primarily reflects Federal and State income tax expense on U.S. operations, income tax expense attributable to the Company’s subsidiaries in foreign jurisdictions in accordance with applicable local tax regulations, including the tax impact of IRS section 162(m) adjustments and Global Intangible Low-Taxed Income (“GILTI”) inclusions. The tax provision was partially offset by the favorable effect of stock-based compensation and the release of valuation allowances on deferred tax assets of the Company’s Canadian and German subsidiaries, resulting from improved expectations of future taxable income in those jurisdictions, and the reversal of previously recorded uncertain tax positions, in accordance with ASC 740.

Although the Company generated taxable income in the United States during the period, the related current tax liability was partially offset by deferred tax assets arising from the net operating loss carryforwards (“NOLCOs”)

The estimated effective tax rate applied to the six-month period ended June 30, 2025 is lower than the U.S. federal statutory rate of 21% principally due to the favorable effect of stock-based compensation and change in valuation allowance, offset in part by IRS section 162(m) adjustments, state income tax provisions and tax effect of foreign operations.

The estimated effective tax rate applied to the six-month period ended June 30, 2024, is higher than the U.S. federal statutory rate of 21% principally due to income earned outside the United States which is subject to the U.S. tax on global intangible low taxed income (“GILTI”), tax effects of foreign operations, changes in valuation allowance, provision on uncertain tax positions, and other net increases, offset in part by a reduction in foreign exchange gains and losses, deemed interest and true up adjustment on prior year tax provision.

During the first quarter of 2025, the Company determined it was more likely than not that one of the Company’s subsidiaries in Canada would be able to realize the benefit of the deferred tax assets in Canada, resulting in the release of the valuation allowance. In reaching this determination, the Company considered the growing trend of profitability over the last three years in the Canadian subsidiary, as well as expectations regarding the generation of future taxable income.

During the second quarter of 2025, the Company determined it was more likely than not that the Company’s subsidiary in Germany would be able to realize the benefit of the deferred tax assets in Germany, resulting in the release of the valuation allowance. In reaching this determination, the Company considered the growing trend of profitability over the last three years in the German subsidiary, as well as expectations regarding the generation of future taxable income.

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The reconciliations of the U.S. federal statutory rate with the Company’s effective tax rate for the six months ended June 30, 2025 and 2024, respectively, are summarized in the table below:


	For the Six Months
	Ended June 30,
	2025		2024
Federal income tax expense at statutory rate	21.0	%	21.0	%
Effect of:
Section 162 (m)	14.3		-
State income tax net of federal benefit	2.5		0.8
Tax effects of foreign operations	1.5		7.1
GILTI provisions	0.8		17.6
Withholding tax	0.2		-
Deemed interest	(0.3)		(5.2)
Foreign rate differential	(0.4)		(1.4)
Change in tax rates	(0.7)		-
Change in valuation allowance	(2.1)		6.4
Effect of stock-based compensation	(21.1)		(2.9)
Increase in unrecognized tax benefits (ASC 740)	-		5.5
Return to provision true up	-		(3.2)
Foreign operations permanent differences - foreign exchange gains and losses	-		(7.9)
Other	0.4		4.2
Effective tax rate	16.1	%	42.0	%

The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the six months ended June 30, 2025 (in thousands):


	Unrecognized
	Tax Benefits
Balance - January 1, 2025	$	999
Increase for current period tax positions		173
Decrease for prior year tax positions		(214)
Interest accrual		28
Foreign currency remeasurement		6
Balance - June 30, 2025	$	992

5.Operating Leases

The Company has various lease agreements for its offices and service delivery centers and has determined that the risks and benefits related to these leased properties are retained by the lessors. Accordingly, these are accounted for as operating leases. Lease agreements with a term of less than one year are treated as short-term leases and are accounted for separately as shown in the table below.

Most of these lease agreements are renewable at the mutual consent of the parties to the contract. These lease agreements are for terms ranging from three to eleven years and, in most cases, provide for rent escalations ranging from 1.75% to 15%.

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The table below summarizes the amounts recognized in the condensed consolidated financial statements related to operating leases for the periods presented (in thousands):


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Rent expense for long-term operating leases	$	314	$	314	$	629	$	628
Rent expense for short-term leases		48		44		89		91
Total rent expense	$	362	$	358	$	718	$	719

The following table presents the maturity profile of the Company’s operating lease liabilities based on the contractual undiscounted payments with a reconciliation of these amounts to the remaining net present value of the operating lease liability reported in the condensed consolidated balance sheet as of June 30, 2025 (in thousands):


Year	Amount
2025	$	651
2026		1,329
2027		1,325
2028		957
2029		695
2030 and thereafter		174
Total lease payments		5,131
Less: Interest		(908)
Net present value of lease liabilities	$	4,223

Current portion	$	928
Long-term portion		3,295
Total	$	4,223

The weighted average remaining lease terms and discount rates for all of the Company’s operating leases as of June 30, 2025 were as follows:


Weighted-average lease term remaining	45 months
Weighted-average discount rate	9.39	%

6.Long-term obligations

Total long-term obligations as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):


	June 30,		December 31,
	2025		2024
Pension obligations - accrued pension liability	$	8,655	$	7,945
Microsoft licenses ⁽¹⁾		315		442
		8,970		8,387
Less: Current portion of long-term obligations		1,477		1,643
Total Non-Current portion of long-term obligations	$	7,493	$	6,744

(1)In March 2023, the Company renewed a vendor agreement to acquire certain additional software licenses, receive technical support and future software upgrades on software licenses through February 2026. Pursuant to this agreement, the Company is contractually liable to pay approximately $0.4 million annually over the term of the agreement.

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7.Commitments and Contingencies

Litigation – In 2008, a judgment was rendered in the Philippines against a Philippine subsidiary of the Company that is no longer active and purportedly also against Innodata Inc., in favor of certain former employees of the Philippine subsidiary. The potential payment amount aggregates to approximately $5.8 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 legal interest 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. In December 2017, a group of 97 of the former employees of the Philippine subsidiary indicated that they proposed to record the judgment as to themselves in New Jersey. In January 2018, in response to an action initiated by Innodata Inc., the United States District Court for the District of New Jersey (“USDC”) entered a preliminary injunction that enjoins these former employees from pursuing or seeking recognition or enforcement of the judgment against Innodata Inc. in the United States during the pendency of the action and until further order of the USDC. In June 2018, the USDC entered a consent order administratively closing the action subject to return of the action to the active docket upon the written request of Innodata Inc. or the former employees, with the USDC retaining jurisdiction over the matter and the preliminary injunction remaining in full force and effect.

In February 2024, David D’Agostino filed a putative class action captioned D’Agostino v. 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. The Securities Class Action complaint, as amended, 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. The Company intends to defend itself vigorously. On March 7, 2025, the Company filed a motion to dismiss the Securities Class Action complaint. On April 10, 2025, the plaintiff filed a Second Amended Complaint to the Securities Class Action complaint (the “Second Amended Complaint”) to correct purported typographical errors in the Securities Class Action complaint. On April 11, 2025, the Company filed a motion to dismiss the Second Amended Complaint. The motion to dismiss is fully briefed and pending with the USDC. 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.

Subsequently, in March 2024, the Company received a letter from the staff of the SEC, requesting the Company preserve certain documents and data; in August 2024 the Company received a grand jury subpoena from the U.S. 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 were related to the conduct alleged in the Securities Class Action. On June 12, 2025, the DOJ notified the Company that it has closed its investigation into the Company. Separately, the SEC has likewise notified the Company that it has concluded its investigation and does not intend to recommend an enforcement action against the Company.

The Company is also subject to various other legal proceedings and claims that have arisen in the ordinary course of business. While the Company believes that it has adequate reserves for those losses that it believes are probable and can be reasonably estimated, the ultimate results of legal proceedings and claims cannot be predicted with certainty.

While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s consolidated financial position or overall trends in consolidated results of operations, litigation is subject to inherent uncertainties. Substantial recovery against the Company in the above-referenced Philippine action could have a material adverse impact on the Company, and unfavorable rulings or recoveries in the other proceedings described above could have a material adverse impact on the consolidated operating results in the period in which the ruling or recovery occurs. In addition, the Company’s estimate of the potential impact on the Company’s consolidated financial position or overall consolidated results of operations for the above referenced legal proceedings could change in the future.

The Company’s legal accruals related to legal proceedings and claims are based on the Company’s determination of whether or not a loss is probable. The Company reviews outstanding proceedings and claims with external counsel to assess probability and estimates of loss. The accruals are adjusted if necessary. While the Company intends to defend these matters vigorously, adverse outcomes that it estimates could reach approximately $450,000 in the aggregate beyond recorded amounts are reasonably possible. If circumstances change, the Company may be required to record adjustments that could be material to its reported consolidated financial condition and results of operations.

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8.Stock Options and Restricted Stock Units

The stock-based compensation expense related to the Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016 (the “2013 Plan”) and the Innodata Inc. 2021 Equity Compensation Plan, as amended and restated effective as of April 11, 2022 (the “2021 Plan”, and together with the 2013 Plan, collectively, the “Equity Plans”) were allocated as follows (in thousands):


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Direct operating costs	$	441	$	73	$	868	$	157
Selling and administrative expenses		2,280		919		4,734		1,869
Total stock-based compensation	$	2,721	$	992	$	5,602	$	2,026

Stock Options

2013 Plan

A summary of option activity under the 2013 Plan and changes during each of the six-month periods ended June 30, 2025 and 2024 are presented below:


				Weighted-Average
	Number of	Weighted - Average		Remaining Contractual	Aggregate
	Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2025	3,165,193	$	3.67	6.32	$	113,458,326
Granted	-		-	-		-
Exercised	(236,542)		4.48	-		-
Forfeited/Expired	-		-	-		-
Outstanding at June 30, 2025	2,928,651	$	3.61	5.85	$	139,434,371

Exercisable at June 30, 2025	2,830,316	$	3.62	5.80	$	134,732,975

Vested and Expected to vest at June 30, 2025	2,928,651	$	3.61	5.85	$	139,434,371


				Weighted-Average
	Number of	Weighted - Average		Remaining Contractual	Aggregate
	Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2024	5,339,162	$	3.22	6.38	$	28,640,009
Granted	-		-	-		-
Exercised	(155,899)		4.00	-		-
Forfeited/Expired	(4,001)		6.96	-		-
Outstanding at June 30, 2024	5,179,262	$	3.19	5.87	$	60,291,271

Exercisable at June 30, 2024	3,402,382	$	2.20	4.92	$	42,967,259

Vested and Expected to vest at June 30, 2024	5,179,262	$	3.19	5.87	$	60,291,271

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2021 Plan

A summary of option activity under the 2021 Plan and changes during the six-month periods ended June 30, 2025 and 2024 are presented below.


				Weighted-Average
	Number of	Weighted - Average		Remaining Contractual	Aggregate
	Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2025	842,271	$	15.86	8.46	$	20,847,471
Granted	-		-	-		-
Exercised	(116,874)		3.51	-		-
Forfeited/Expired	(16,335)		3.41	-		-
Outstanding at June 30, 2025	709,062	$	18.19	8.09	$	23,423,424

Exercisable at June 30, 2025	198,204	$	3.32	7.23	$	9,494,233

Vested and Expected to vest at June 30, 2025	709,062	$	18.19	8.09	$	23,423,424


				Weighted-Average
	Number of	Weighted - Average		Remaining Contractual	Aggregate
	Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2024	923,571	$	3.41	8.76	$	4,786,252
Granted	-		-	-		-
Exercised	(46,430)		3.41	-		-
Forfeited/Expired	(7,668)		3.41	-		-
Outstanding at June 30, 2024	869,473	$	3.41	8.27	$	9,927,362

Exercisable at June 30, 2024	339,779	$	3.33	8.24	$	3,907,176

Vested and Expected to vest at June 30, 2024	869,473	$	3.41	8.27	$	9,927,362

There were no options granted during the six months ended June 30, 2025 and 2024.

During the six months ended June 30, 2025, a total of 353,416 options were exercised at an average exercise price of $4.16.

The compensation cost related to non-vested stock options not yet recognized as of June 30, 2025 totaled approximately $7.3 million. The weighted-average period over which these costs will be recognized is 29 months.

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Restricted Stock Units

Restricted stock unit activity under the Equity Plans during each of the six-month periods ended June 30, 2025 and 2024 are presented below:


	Number of	Weighted-Average
	Restricted Stock	Grant Date
	Units	Fair Value
Unvested at January 1, 2025	1,249,079	$	20.98
Granted	14,580		44.81
Vested	(213,173)		6.36
Forfeited/Expired	(541,250)		7.07
Unvested at June 30, 2025	509,236	$	42.57


	Number of	Weighted-Average
	Restricted Stock	Grant Date
	Units	Fair Value
Unvested at January 1, 2024	749,756	$	5.77
Granted	28,973		15.10
Vested	(48,761)		8.42
Forfeited/Expired	(995)		8.29
Unvested at June 30, 2024	728,973	$	5.96

There were a total of 11,829 restricted stock units granted to non-employee directors during the six months ended June 30, 2025.

The compensation cost related to non-vested restricted stock units not yet recognized as of June 30, 2025 totaled approximately $17.9 million. The weighted-average period over which these costs will be recognized is 29 months.

9.Comprehensive loss

Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, consists of pension liability adjustments, net of taxes, foreign currency translation adjustment and changes in fair value of derivatives, net of taxes. The components of accumulated other comprehensive loss as of June 30, 2025 and 2024, and reclassifications from accumulated other comprehensive loss for the three and six-month periods, are presented below (in thousands):


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at April 1, 2025	$	(234)	$	(121)	$	(1,733)	$	(2,088)
Other comprehensive income (loss) before reclassifications, net of taxes		(36)		265		582		811
Total other comprehensive income (loss) before reclassifications, net of taxes		(270)		144		(1,151)		(1,277)
Net amount reclassified to earnings		1		(17)		-		(16)
Balance at June 30, 2025	$	(269)	$	127	$	(1,151)	$	(1,293)

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					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at January 1, 2025	$	(233)	$	(395)	$	(1,842)	$	(2,470)
Other comprehensive income (loss) before reclassifications, net of taxes		(36)		386		691		1,041
Total other comprehensive loss before reclassifications, net of taxes		(269)		(9)		(1,151)		(1,429)
Net amount reclassified to earnings		-		136		-		136
Balance at June 30, 2025	$	(269)	$	127	$	(1,151)	$	(1,293)


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at April 1, 2024	$	(413)	$	7	$	(1,380)	$	(1,786)
Other comprehensive loss before reclassifications, net of taxes		-		(193)		(78)		(271)
Total other comprehensive income (loss) before reclassifications, net of taxes		(413)		(186)		(1,458)		(2,057)
Net amount reclassified to earnings		-		19		-		19
Balance at June 30, 2024	$	(413)	$	(167)	$	(1,458)	$	(2,038)


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at January 1, 2024	$	(412)	$	41	$	(1,250)	$	(1,621)
Other comprehensive loss before reclassifications, net of taxes		-		(206)		(208)		(414)
Total other comprehensive loss before reclassifications, net of taxes		(412)		(165)		(1,458)		(2,035)
Net amount reclassified to earnings		(1)		(2)		-		(3)
Balance at June 30, 2024	$	(413)	$	(167)	$	(1,458)	$	(2,038)

Taxes related to each component of other comprehensive loss were not material for each of the three and six-month periods presented and therefore not disclosed separately.

All reclassifications from accumulated other comprehensive income (loss) had an impact on direct operating costs in the condensed consolidated statements of operations and comprehensive income.

10.Segment reporting and concentrations

The Company’s operations are classified in three reporting segments: Digital Data Solutions (“DDS”), Synodex and Agility.

The DDS segment provides AI data preparation services, collecting or creating training data, annotating training data, and training AI algorithms for its customers, and AI model deployment and integration. The DDS segment also provides a range of data engineering support services including data transformation, data curation, data hygiene, data consolidation, data extraction, data compliance, and master data management.

The Synodex segment provides an industry platform that transforms medical records into useable digital data organized in accordance with its proprietary data models or customer data models.

The Agility segment provides an industry platform that 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 channels (print, web, radio and TV) and social media channels.

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A significant portion of the Company’s revenues is generated from its locations in the Philippines, India, Sri Lanka, Canada, Germany, Israel, United States and the United Kingdom.

The Company’s chief operating decision maker (“CODM”) is the senior executive committee that includes the chief executive officer, the chief operating officer, and the chief financial officer (interim).

The U.S. GAAP measures used by the Company’s CODM to evaluate segment performance and allocate resources—such as employees, property, and financial or capital resources during the annual budgeting and forecasting process, are Revenues, Gross Profit and Income before provision for income taxes. Performance results are monitored, reviewed, and measured monthly and quarterly by comparing budget and forecast to actual results for profit measures, assessing returns on investment, compensation decisions and changing strategies, if required.

The accounting policies used by the DDS, Synodex and Agility segments are the same as those described in the summary of significant accounting policies.

The measure of segment assets is reported on the balance sheet as total consolidated assets shown in the table below (in thousands):


	June 30, 2025		December 31, 2024*
Total assets:
DDS	$	112,159	$	91,588
Synodex		4,828		4,790
Agility⁽¹⁾		15,636		17,071
Total Consolidated	$	132,623	$	113,449

*Prior period segment assets of DDS, Synodex and Agility segments have been reclassified to align with the current period presentation, with no impact on the Company’s consolidated results.

(1)	Agility assets include goodwill of $2.1 million and $2.0 million for each of the periods ended June 30, 2025 and December 31, 2024, respectively.

(2)	Segment assets consist of cash, receivables, prepaid and other assets, property and equipment, right of-use-assets, deferred income tax and intangibles.

The table below shows segment information for other significant income statement items (in thousands):


	Three Months Ended June 30, 2025
		DDS		Synodex	Agility		Total
Revenues	$	50,576	$	2,065	$	5,752	$	58,393
Direct operating costs ^{(1) (3)}		31,177		1,618		2,575		35,370
Gross profit		19,399		447		3,177		23,023
Selling and administrative expenses ^{(2) (4)}		10,430		140		3,542		14,112
Segment operating income (loss)		8,969		307		(365)		8,911
Interest income, net		(577)		-		-		(577)
Income (loss) before provision for income taxes	$	9,546	$	307	$	(365)	$	9,488

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Three Months Ended June 30, 2024
	DDS		Synodex		Agility		Total
Revenues	$	25,410	$	1,986	$	5,157	$	32,553
Direct operating costs ^{(1) (3)}		19,331		1,530		2,341		23,202
Gross profit		6,079		456		2,816		9,351
Selling and administrative expenses ^{(2) (4)}		6,197		140		2,683		9,020
Segment operating income (loss)		(118)		316		133		331
Interest (income) expense, net		54		-		1		55
Income (loss) before provision for income taxes	$	(172)	$	316	$	132	$	276


	Six Months Ended June 30, 2025
	DDS		Synodex		Agility		Total
Revenues	$	101,406	$	4,079	$	11,252	$	116,737
Direct operating costs ^{(1) (3)}		62,279		3,079		5,104		70,462
Gross profit		39,127		1,000		6,148		46,275
Selling and administrative expenses ^{(2) (4)}		22,025		427		6,640

INNODATA INC 10-Q