INNODATA INC
For the period ended Mar 31, 2026. Filed May 7, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 2026
INOD$37.03-4.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-06.
0001104659-25-107873
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001104659-26-057270
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 167 previous paragraphs and 113 current paragraphs.
51 unchanged; 21 reworded; 41 added; 89 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (41)
Current report
Innodata Inc. (Nasdaq: INOD) (together with its subsidiaries, the “Company”, “Innodata”, “we”, “us” or “our”) is a global data engineering and AI systems services company that supports the development, training, post-training, evaluation, and deployment of advanced artificial intelligence systems. We partner with leading technology companies, frontier AI laboratories, and enterprises to help enable AI systems that perform reliably, align with intended objectives, and operate safely in real-world environments.
Current report
Our mission is to enable the responsible advancement of artificial intelligence by providing the data, evaluation frameworks, and human expertise required to build AI systems that can be trusted at scale. We believe that AI will increasingly function as a foundational layer of the digital economy - embedded across consumer products, enterprise workflows, and mission-critical systems. As AI systems grow more capable and autonomous, we believe the quality of training data, the effectiveness of post-training alignment, and the rigor of ongoing evaluation will be decisive factors in determining whether AI systems are adopted, regulated, and scaled responsibly.
Current report
Innodata was founded more than 35 years ago on the principle that high-quality, well-structured data is essential to leading information-retrieval systems. In 2016-2017, we began building proprietary AI language models based on then-emerging research and frameworks and integrating them into our data production workflows. Through this work, we developed and refined techniques for generating, curating, and validating human-created data used to train probabilistic, learning-based AI systems, and recognized that data quality and structure were critical determinants of model performance. This insight led us to invest in the development of an integrated set of AI lifecycle data solutions, addressing a growing market need for specialized data engineering, evaluation, and refinement capabilities across the full lifecycle of AI systems.
Current report
Today, leading AI innovation labs and Big Tech companies (including five of the so-called “Magnificent Seven”) building frontier generative AI models and leading enterprises engage us to provide (i) training and post-training data development; (ii) alignment and preference optimization; (iii) capabilities, alignment, and safety evaluation; and (iv) AI enablement and operationalization, including support for agentic and tool-using systems.
Current report
We believe Innodata is differentiated by: (i) our ability to operate across the AI lifecycle in alignment with AI developers’ internal development and deployment pipelines; (ii) our scale of specialized human expertise; (iii) purpose-built platforms and processes that combine automation with rigorous human oversight; (iv) a research-driven approach to measurement, safety, and operational reliability, which is particularly relevant for frontier model developers and enterprises deploying AI in high-stakes environments; and (v) our dual role supporting leading technology companies building advanced AI systems and enterprises deploying those systems in production, which we believe creates a reinforcing feedback loop that strengthens our capabilities across both contexts and differentiates us from competitors focused on only one side of the market.
Current report
Market Opportunities
Current report
AI Training and Post-Training Data
Current report
Modern AI systems are trained using large volumes of data rather than explicit, rule-based programming. Foundation models - such as large language models (“LLMs”) and multimodal models - learn statistical representations of language, images, code, and other modalities from vast training corpora.
Current report
As model architectures have matured, leading developers have increasingly emphasized the importance of training data quality, data provenance, supervised fine-tuning, and post-training alignment techniques. We believe that as model scale increases, marginal improvements in data quality and post-training signals can have an outsized impact on performance, reliability, and usability - often exceeding the impact of further parameter scaling alone.
Current report
Organizations developing AI systems therefore require partners that can design, execute, and continuously refine data pipelines capable of supporting large-scale training and post-training cycles while maintaining quality, consistency, and auditability. We believe Innodata is well positioned to meet these requirements.
Current report
Model Evaluation (“Evals”), Alignment, and Safety
Current report
We believe that evaluation of model capabilities and safety (“evals”) are emerging as foundational layers of the AI technology stack, analogous to testing, security, and reliability engineering in traditional software systems. Unlike deterministic software, generative AI systems are probabilistic and context dependent. Their behavior may vary across prompts, tasks, and deployment environments, and may change over time as models are updated or integrated with tools and new data sources.
Current report
As a result, organizations increasingly require continuous evals to understand, measure, and manage model behavior throughout development and deployment. These evals typically include: (i) capabilities evals that assess reasoning, knowledge, and task competence; (ii) alignment and safety evals that measure harmful behavior, misuse risk, and adherence to constraints; and (iii) regression evals designed to detect drift or degradation across model versions. We believe this represents a durable and expanding market opportunity distinct from, but complementary to, data preparation and model training.
Current report
From Output Scoring to Behavioral and Agentic Evals
Current report
Early AI evaluation focused primarily on output correctness. In contrast, today’s frontier systems - particularly agentic and tool-using systems - require behavioral and agentic evals that assess how models plan, reason, and act over time. These evals may examine reasoning coherence, tool selection and invocation, multi-step task execution, adherence to system instructions, and robustness under adversarial or ambiguous inputs.
Current report
This shift toward agentic evaluation materially increases the importance of structured human judgment, domain expertise, and scalable evaluation operations. We believe that the ability to measure not only what a model outputs, but how it arrives at those outputs, is increasingly central to deployment readiness and long-term safety.
Current report
Human-in-the-Loop Evals and Evidence for Trust
Current report
As AI systems are deployed into regulated or high-stakes environments, customers increasingly require evidence that systems have been evaluated, documented, and monitored. This has driven demand for human-in-the-loop eval frameworks that combine expert judgment with automation to produce results that are interpretable, repeatable, and auditable.
Current report
Innodata’s evaluation programs emphasize rubricized scoring for consistency, subject-matter experts for high-risk domains, hybrid human-plus-automated evaluation pipelines, and longitudinal measurement to track regressions and improvements over time. We believe these capabilities position us to support emerging governance and regulatory expectations related to transparency, accountability, and risk management in AI systems.
Current report
Red Teaming, Adversarial Evals, and Safety Research
Current report
AI safety has expanded to include misuse, exploitability, and unintended system behaviors - particularly as models are connected to retrieval systems, code execution environments, autonomous agents, and enterprise tools. Innodata conducts structured red teaming and adversarial evaluations to surface failure modes that are not observable through standard benchmarks. These efforts include probing prompt-injection and jailbreak vulnerabilities, testing misuse scenarios involving retrieval-augmented generation, agent workflows, and tool use, identifying degradation under distribution shift, and supporting mitigation through targeted post-training datasets. In parallel, we have expanded our cybersecurity capabilities as applied to LLMs and AI agents, including threat modeling for agent-based systems, assessment of data exfiltration and privilege-escalation risks, evaluation of secure tool invocation and sandboxing controls, and testing of monitoring and guardrail mechanisms designed to reduce exposure to adversarial attacks and enterprise security breaches.
Current report
We believe red teaming and adversarial evals are increasingly viewed as prerequisites for deployment rather than optional safeguards.
Current report
High-Risk Domains and Societal Safety
Current report
As frontier AI capabilities advance, developers and governments have raised concerns about misuse in high-impact domains, including non-proliferation, chemical and biological risk, and large-scale misinformation. Innodata supports mitigation efforts through domain-specific safety evals, targeted mitigation datasets, collaboration with academic and government-adjacent experts, and evaluation frameworks designed to preserve performance on legitimate use cases while reducing the risk of harmful behaviors or misuse.** **
Current report
We believe that over the next decade, AI will be embedded across nearly all industries. Innodata supports customers in operationalizing AI systems, including model customization, workflow integration, context engineering, and continuous quality assurance. Our platforms and services are designed to accommodate rapid innovation in model architectures and techniques, enabling customers to adopt new approaches without re-architecting their AI operations.
Current report
We offer a range of AI-enabled platforms and solutions that support data transformation, analytics, and workflow automation across industries, including solutions that convert medical records into structured digital data for use in insurance and healthcare applications, as well as media intelligence and public relations workflow software enhanced with AI-driven monitoring, analytics, and content capabilities.
Current report
These offerings operate within a unified technology and service delivery model and leverage shared data, infrastructure, and artificial intelligence capabilities. We continue to invest in these solutions to incorporate advances in artificial intelligence, with a focus on reliability, transparency, and user trust.
Current report
We now operate under one single segment.
Current report
Changes in Segment Reporting
Current report
Effective for the quarter ended March 31, 2026, the Company revised its segment reporting structure. Previously, we reported three segments; following a change in the CODM’s approach, we now report as a single segment. This change was made to align segment reporting with the CODM’s resource allocation and performance assessment process. For additional information, refer to Note 11 to the financial statements.
Current report
Adjusted EBITDA
Current report
Total revenues were $90.1 million and $58.3 million for the three months ended March 31, 2026 and 2025, respectively, an increase of $31.8 million or approximately 54%. Revenue increased primarily due to higher volume for AI-related data services, including the expansion of existing customer programs and new client engagements supporting more complex AI workflows.
Current report
Direct operating costs were $50.3 million and $35.1 million for the three months ended March 31, 2026 and 2025, respectively, an increase of $15.2 million or approximately 43%. The cost increase was primarily attributable to an increase in headcount to support higher volumes of AI-related services and expanded customer engagements.
Current report
The increase in direct operating costs includes $14.3 million from direct and indirect labor-related costs, primarily driven by new hires, incentive compensation, salary increases and severance. Additional increases included cloud service subscriptions of $1.0 million, driven by increased cloud usage and data processing requirements in support of higher revenues, AI-related services and expanded customer engagements, depreciation and amortization of capitalized developed software of $0.6 million, shipping costs of $0.6 million, content-related costs of $0.2 million, occupancy-related costs of $0.2 million, offset in part by a reduction in recruitment fees of $0.9 million and a favorable impact of foreign exchange rate fluctuations of $0.8 million. Direct operating costs as a percentage of total revenues were 56% and 60% for the three months ended March 31, 2026 and 2025, respectively. The decrease in direct operating costs as a percentage of total revenues was primarily attributable to higher revenues, offset in part by increased direct operating costs.
Current report
Selling and administrative expenses were approximately $22.9 million and $15.0 million for the three months ended March 31, 2026 and 2025, respectively, an increase of $7.9 million or approximately 53%. The increase in selling and administrative expenses was primarily due to continued investments in growth-oriented and capability-building functions. In addition, labor costs increased as we continue to invest in sales, account management, and marketing resources to support new customer acquisition, expand relationships with existing customers, and strengthen our market presence through solution design, go-to-market execution, and thought leadership initiatives.
Current report
The increase in selling and administrative expenses was primarily attributable to increased selling, marketing, and administrative payroll and related expenses of $8.5 million, driven by new hires, salary increases, incentives and bonuses. Additional increases included higher business software subscriptions of $0.5 million, travel and entertainment costs of $0.2 million, an increase in the provision for credit losses of $0.1 million and an increase in other selling and administrative expenses of $0.3 million, offset by lower professional and recruitment fees of $1.5 million, marketing-related expenses of $0.1 million and a favorable impact of foreign exchange rate fluctuations of $0.1 million. Selling and administrative expenses as a percentage of total revenues were approximately 25% and 26% for the three months ended March 31, 2026 and 2025, respectively. The decrease in selling and administrative expenses as a percentage of total revenues was primarily attributable to higher revenues, offset in part by increased selling and administrative expenses.
Current report
We recorded an income tax provision of approximately $2.4 million and $0.6 million for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate was 14.1% and 7.3% for the three months ended March 31, 2026 and 2025, respectively. The difference was primarily attributable to unfavorable U.S. tax implications of Global Intangible Low-Taxed Income (GILTI) in the current quarter.
Current report
In each quarter, we will update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate is subject to significant volatility due to several factors, including our ability to accurately predict the proportion of income (loss) before provision for income taxes in multiple jurisdictions, the effects of tax law changes, and the U.S. tax implications related to Global Intangible Low-Taxed Income.
Current report
(Refer to Note 4 of Notes to Condensed Consolidated Financial Statements for the components of the income tax provision for the three-month periods ended March 31, 2026 and 2025).
Current report
Adjusted gross profit was $42.6 million and $25.2 million for the three months ended March 31, 2026 and 2025, respectively. The $17.4 million increase in adjusted gross profit was primarily due to higher revenues, offset in part by higher direct operating costs. Adjusted gross margin was 47% and 43% for the three months ended March 31, 2026 and 2025, respectively. The increase in adjusted gross margin was primarily due to higher revenues, offset in part by higher direct operating costs.
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Removed paragraphs (89)
Previous report
Innodata Inc. (Nasdaq: INOD) (including its subsidiaries, the “Company,” “Innodata,” “we,” “us” or “our”) is a leading data engineering company. Our mission is to help the world’s most prestigious companies deliver the promise of ethical, high-performing artificial intelligence (“AI”), which we believe will contribute to a safer and more prosperous world.
Previous report
Innodata was founded on a simple idea: engineer the highest quality data so organizations across broad industry segments could make smarter decisions. Today, we believe we are delivering the highest quality data for some of the world’s most innovative technology companies to use to train the AI models of the future.
Previous report
AI holds the promise that computers can perceive and understand the world, enabling products and services that would have been previously unimaginable and impossible with traditional coding. AI learns from data, and the highest-performing AI will have learned from the highest-quality data. 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.
Previous report
We are also helping companies deploy and integrate AI into their operations and products and providing innovative AI-enabled industry platforms, helping ensure that our customers’ businesses are prepared for a world in which machines augment human activity in ways previously unimaginable.
Previous report
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. 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. In 2019, we began packaging the capabilities that emerged from our R&D efforts in order to align with several fast-growing new markets and help companies use AI and machine learning (“ML”) to drive performance benefits and business insights.
Previous report
Our historical core competency in high-quality data, combined with these R&D efforts in applied AI, created the foundation for the evolution of our offerings, which include AI Data Preparation, AI Model Deployment and Integration, and AI-Enabled Industry Platforms.
Previous report
AI Data Preparation
Previous report
For several of the world’s large technology companies, we support their efforts at building generative AI foundation models. For these companies, we provide or are poised to provide a range of scaled data solutions and services. Our scaled data solutions include providing instruction data sets for fine-tuning large language models (“LLMs”) to understand prompts, to accept instruction, to converse, to apparently reason, and to perform the myriad of incredible feats that many of us have now experienced. 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.
Previous report
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.
Previous report
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 costs 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 platform encapsulates many of the innovations we conceived of in the course of our 35+ year history of creating high-quality data.
Previous report
In addition, because collecting real-world data is often impracticable (due to data privacy regulations or the rarity of cohorts and outliers), we create high-quality synthetic data that maintains all of the statistical properties of real-world data, using a combination of domain specialists and machine technologies that leverage LLMs.
Previous report
We help businesses leverage the latest AI technologies to achieve their goals. We develop custom AI models (where we select the appropriate algorithms, tune hyperparameters, train and validate the models, and update the models as required). We also help businesses fine-tune their own custom versions of our proprietary models and third-party foundation models to address domain-specific and customer-specific use cases.
Previous report
For our customers that provide products and solutions that require intensive text data processing and analytics, in addition to deploying and integrating AI models, we often provide a range of data engineering support services including data transformation, data curation, data hygiene, data consolidation, data extraction, data compliance, and master data management.
Previous report
Our customers span a diverse range of industries and a wide range of AI use cases, benefiting from the short time-to-value and high economic returns of our AI solutions and platforms.
Previous report
Our AI-enabled industry platforms address specific, niche market requirements we believe we can innovate with AI/ML technologies. We deploy these industry platforms as software-as-a-service (“SaaS”) and as managed services. These platforms benefit from our technology infrastructure, our industry-specific knowledge, our strong customer relationships and experience merging technology with the business processes of our customers. To date, we have built an industry platform for medical records data extraction and transformation (which we brand as “Synodex®”) and an industry platform for public relations (which we brand as “Agility PR Solutions”). We are in the development with an additional AI-enabled industry platform to serve financial services institutions.
Previous report
Our Synodex industry platform transforms medical records into useable digital data organized in accordance with our proprietary data models or customer data models.
Previous report
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.
Previous report
Our operations are presently classified and reported in three reporting segments: Digital Data Solutions, Synodex and Agility.
Previous report
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 seasonality is directly linked to the number of life insurance applications received by the insurance companies.
Previous report
Total revenues were $62.6 million and $52.2 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $10.4 million or approximately 20%.
Previous report
Revenues from the DDS segment were $54.8 million and $44.7 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $10.1 million or approximately 23%. The increase was primarily attributable to higher volume from existing customers.
Previous report
Revenues from the Synodex segment were $1.7 million and $1.9 million for the three months ended September 30, 2025 and 2024, respectively, a decrease of $0.2 million or 11%. The decrease was primarily attributable to termination of a contract with one customer.
Previous report
Revenues from the Agility segment were $6.1 million and $5.6 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $0.5 million or approximately 9%. The increase was principally attributable to higher volumes from subscriptions to our Agility AI-enabled industry platform.
Previous report
Direct operating costs were $37.0 million and $30.9 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $6.1 million or 20%. The cost increase was primarily due to increased headcount to support higher volumes from existing customers. The increase in direct operating costs includes $4.8 million from direct and indirect labor related costs primarily on account of new hires, higher incentives and salary increases; higher recruitment fees of $0.6 million; higher cloud service subscriptions of $0.6 million, higher content costs of $0.3 million, higher depreciation and amortization of capitalized developed software of $0.2 million; andan increase in other direct operating costs of $0.3 million; offset in part bya favorable impact of foreign exchange rate fluctuations of $0.7 million. Direct operating costs as a percentage of total revenues were 59% for each of the three-month periods ended September 30, 2025 and 2024.
Previous report
Direct operating costs for the DDS segment were $32.6 million and $27.0 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $5.6 million or 21%. The cost increase was primarily due to increased headcount to support higher volumes from existing customers. The increase in direct operating costs includes $4.8 million from direct and indirect labor related costs primarily on account of new hires, higher incentives and salary increases; higher recruitment fees of $0.6 million, higher cloud service subscriptions of $0.5 million, higher depreciation and amortization of $0.1 million; andan increase in other direct operating costs of $0.3 million; offset in part bya favorable impact of foreign exchange rate fluctuations of $0.7 million. Direct operating costs for the DDS segment as a percentage of DDS segment revenues were 59% and 60% for the three months ended September 30, 2025 and 2024, 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.
Previous report
Direct operating costs for the Synodex segment were $1.5 million for each of the three-month periods ended September 30, 2025 and 2024. Direct operating costs for the Synodex segment as a percentage of Synodex segment revenues were 88% and 79% for the three months ended September 30, 2025 and 2024, respectively. The increase in direct operating costs of the Synodex segment as a percentage of Synodex segment revenues was due to lower revenues due to the termination of a contract with one customer.
Previous report
Direct operating costs for the Agility segment were $2.9 million and $2.4 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $0.5 million or 21%. The increase in direct operating costs was a result ofhigher content costs of $0.3 million, higher depreciation and amortization of capitalized developed software of $0.1 million and an increase in other direct operating costs of $0.1 million. Direct operating costs for the Agility segment as a percentage of Agility segment revenues were 48% and 43% for the three months ended September 30, 2025 and 2024. The increase in direct operating costs of the Agility segment as a percentage of Agility segment revenues was due to higher direct operating costs offset by higher revenues.
Previous report
Gross profit was $25.5 million and $21.3 million for the three months ended September 30, 2025 and 2024, respectively. The $4.2 million increase in gross profit was primarily due to higher revenues in the DDS and Agility segments, offset in part by higher direct operating costs in the DDS and Agility segments and lower revenues in the Synodex segment. Gross margin was 41% for each of the three-month periods ended September 30, 2025 and 2024.
Previous report
Gross profit for the DDS segment was $22.2 million and $17.6 million for the three months ended September 30, 2025 and 2024, respectively. The $4.6 million increase in gross profit for the DDS segment was primarily due to higher revenues, offset in part by higher direct operating costs. Gross margin for the DDS segment was 40% and 39% for the three months ended September 30, 2025 and 2024, 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.
Previous report
Gross profit for the Synodex segment was $0.1 million and $0.5 million for the three months ended September 30, 2025 and 2024, respectively. The $0.4 million decrease in gross profit for the Synodex segment was due to lower revenues. Gross margin for the Synodex segment was 7% and 25% for the three months ended September 30, 2025 and 2024, respectively. The decrease in gross margin for the Synodex segment as a percentage of revenues was primarily due to lower revenues.
Previous report
Gross profit for the Agility segment was $3.2 million for each of the three-month periods ended September 30, 2025 and 2024, respectively. Gross margin for the Agility segment was 53% and 58% for the three months ended September 30, 2025 and 2024. The decrease in gross margin for the Agility segment as a percentage of revenues was primarily due to higher direct operating costs, offset by higher revenues.
Previous report
Selling and administrative expenses were $13.7 million and $9.9 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $3.8 million or 38%. The increase in selling and administrative expenses was primarily due to higher expenses associated with the increase in revenues. The increase in selling and administrative expenses includes higher selling and administrative payroll and related expenses of $4.0 million, primarily on account of new hires, salary increases, incentives and bonuses; higher software subscriptions of $0.4 million, and an unfavorable impact of foreign exchange rate fluctuations of $0.2 million; offset in part by lower professional fees of $0.5 million, lower expenses for marketing-related activities of $0.1 million and a decrease in other selling and administrative expenses of $0.2 million. Selling and administrative expenses as a percentage of total revenues were 22% and 19% for the three months ended September 30, 2025 and 2024, respectively. The increase in selling and administrative expenses as a percentage of total revenues was primarily attributable to higher selling and administrative expenses in all segments and lower revenues in the Synodex segment, offset by higher revenues in the DDS and Agility segments.
Previous report
Selling and administrative expenses for the DDS segment were $10.2 million and $7.0 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $3.2 million or 46%. The increase in selling and administrative expenses was primarily due to higher expenses associated with the increase in revenues. The increase in selling and administrative expenses includes higher selling and administrative payroll and related expenses of $3.4 million, primarily on account of new hires, salary increases, incentives and bonuses; higher software subscriptions of $0.3 million and an increase in other selling and administrative expenses of $0.1 million; offset in part by lower professional fees of $0.6 million. Selling and administrative expenses for the DDS segment as a percentage of DDS segment revenues were 19% and 16% for the three months ended September 30, 2025 and 2024, respectively. The increase in selling and administrative expenses of the DDS segment as a percentage of DDS segment revenues was primarily attributable to higher selling and administrative expenses, offset by higher revenues.
Previous report
Selling and administrative expenses for the Synodex segment were $0.2 million and $0.1 million for the three months ended September 30, 2025 and 2024, an increase of $0.1 million or 100%. The increase in selling and administrative expenses is due to higher selling and administrative payroll and related expenses of $0.1 million. Selling and administrative expenses for the Synodex segment as a percentage of Synodex segment revenues were 12% and 5% for the three months ended September 30, 2025 and 2024. The increase in selling and administrative expenses of the Synodex segment as a percentage of Synodex segment revenues was primarily attributable to higher selling and administrative expenses and lower revenues.
Previous report
Selling and administrative expenses for the Agility segment were $3.3 million and $2.8 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $0.5 million or 18%. The increase in selling and administrative expenses includes selling and administrative labor and related expenses of $0.5 million, primarily on account of new hires, salary increases, incentives and bonuses; an unfavorable impact of foreign exchange rate fluctuations of $0.2 million; higher professional fees of $0.1 million and higher software subscriptions of $0.1 million; offsetby lower expenses for marketing-related activities of $0.1 million and a decrease in other selling and administrative expenses of $0.3 million. Selling and administrative expenses for the Agility segment as a percentage of Agility segment revenues were 54% and 50% for the three months ended September 30, 2025 and 2024, respectively. The increase in selling and administrative expenses of the Agility segment as a percentage of Agility segment revenues was primarily due to higher selling and administrative expenses, offset by higher revenues.
Previous report
We recorded a provision for income taxes of $3.8 million and a benefit from income taxes of $5.9 million for the three months ended September 30, 2025 and 2024, respectively. The change is due to the release of the valuation allowance in the prior period; and the effect of the following in the current period: higher Federal and State income tax expense on U.S. operations, deemed interest provision, the effect of unrecognized tax benefits, in accordance with ASC 740, the effect of stock-based compensation, and the tax impact of IRS section 162(m) adjustments; partially offset by the favorable effect of withholding taxes.
Previous report
The provision for the current quarter primarily reflects Federal and State income tax expense on U.S. operations, deemed interest provision, the effect of stock-based compensation, the tax impact of IRS section 162(m) adjustments, partially offset by the favorable impact of withholding taxes.
Previous report
Although the Company generated taxable income in the United States during the period, the related current tax liability was partially offset by the utilization of deferred tax assets arising from the net operating loss carryforwards (“NOLCOs”).
Previous report
Net income was $8.3 million and $17.4 million for the three months ended September 30, 2025 and 2024, respectively. The $9.1 million decrease was due to a higher income tax provision, higher direct operating costs in the DDS and Agility segments, higher selling and administrative expenses in all segments and lower revenues in the Synodex segment; offset in part by higher revenues in the DDS and Agility segments and higher interest income in the current quarter.
Previous report
Net income for the DDS segment was $8.4 million and $16.5 million for the three months ended September 30, 2025 and 2024, respectively. The $8.1 million decrease was due to a higher income tax provision, higher direct operating costs and higher selling and administrative expenses, offset in part by higher revenues and higher interest income in the current quarter.
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Previous wording
These forward-looking statements are based on management’s current expectations, assumptions and estimates and are subject to a number of risks and uncertainties, including, without limitation, impacts resulting from ongoing geopolitical conflicts; investments in large language models; that contracts may be terminated by customers; projected or committed volumes of work may not materialize; pipeline opportunities and customer discussions which may not materialize into work or expected volumes of work; the likelihood of continued development of the markets, particularly new and emerging markets, that our services support; the ability and willingness of our customers and prospective customers to execute business plans that give rise to requirements for our services; continuing reliance on project-based work in the Digital Data Solutions (“DDS”) segment and the primarily at-will nature of such contracts and the ability of these customers to reduce, delay or cancel projects; potential inability to replace projects that are completed, canceled or reduced; our DDS segment’s revenue concentration in a limited number of customers; our dependency on content providers in our Agility segment; our ability to achieve revenue and growth targets; difficulty in integrating and deriving synergies from acquisitions, joint ventures and strategic investments; potential undiscovered liabilities of companies and businesses that we may acquire; potential impairment of the carrying value of goodwill and other acquired intangible assets of companies and businesses that we acquire; a continued downturn in or depressed market conditions; changes in external market factors; the potential effects of U.S. global trading and monetary policy, including the interest rate policies of the Federal Reserve; changes in our business or growth strategy; the emergence of new, or growth in existing competitors; various other competitive and technological factors; our use of and reliance on information technology systems, including potential security breaches, cyber-attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or Company information, or service interruptions; and other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission (“SEC”).
Current wording
These forward-looking statements are based on management’s current expectations, assumptions and estimates and are subject to a number of risks and uncertainties, including, without limitation, impacts resulting from ongoing geopolitical conflicts; anticipated and actual use cases and outcomes; investments in large language models; that contracts may be terminated by customers; projected or committed volumes of work may not materialize; pipeline opportunities and customer discussions which may not materialize into work or expected volumes of work; the likelihood of continued development of the AI markets, particularly new and emerging markets, that our services support; the ability and willingness of our customers and prospective customers to execute business plans that give rise to requirements for our services; continuing reliance on project-based work and the primarily at-will nature of such contracts and the ability of these customers to reduce, delay or cancel projects; potential inability to replace projects that are completed, canceled or reduced; revenue concentration among a limited number of customers; our dependency on third-party providers and partners; our ability to achieve revenue and growth targets; difficulty in integrating and deriving synergies from acquisitions, joint ventures and strategic investments; potential undiscovered liabilities of companies and businesses that we may acquire; potential impairment of the carrying value of goodwill and other acquired intangible assets of companies and businesses that we acquire; a continued downturn in or depressed market conditions; changes in external market factors; the potential effects of U.S. global trade and monetary policy, including the interest rate policies of the Federal Reserve; changes in our business or growth strategy; the emergence of new, or growth in existing competitors; various other competitive and technological factors; our use of and reliance on information technology systems, including potential security breaches, cyber-attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or company information, or service interruptions; and other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission (“SEC”).
Previous wording
In light of these risks and uncertainties, there can be no assurance that the results referred to in any forward-looking statements will occur, and you should not place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date hereof.
Current wording
In light of these risks and uncertainties, there can be no assurance that the results referred to in the forward-looking statements will occur, and you should not place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date hereof.
Previous wording
We define Adjusted Gross Profit as revenues less direct operating costs attributable to Innodata Inc. and its subsidiaries in accordance with U.S. GAAP, plus depreciation and amortization of intangible assets, stock-based compensation, non-recurring severance and other one-time costs included within direct operating cost.
Current wording
We define Adjusted Gross Profit as revenues less direct operating costs attributable to Innodata Inc. and its subsidiaries in accordance with U.S. GAAP, plus depreciation and amortization of intangible assets, stock-based compensation and other one-time costs included within direct operating cost.
Previous wording
The following table contains a reconciliation of Gross Profit and Gross Margin in accordance with the U.S. GAAP attributable to Innodata Inc. and its subsidiaries to Adjusted Gross Profit and Adjusted Gross Margin for the three and nine-month periods ended September 30, 2025 and 2024 (in thousands).
Current wording
The following table contains a reconciliation of Gross Profit and Gross Margin in accordance with the U.S. GAAP attributable to Innodata Inc. and its subsidiaries to Adjusted Gross Profit and Adjusted Gross Margin for the three-month periods ended March 31, 2026 and 2025 (in thousands).
Previous wording
We define Adjusted EBITDA as net income (loss) attributable to Innodata Inc. and its subsidiaries in accordance with U.S. GAAP before net interest expense (income), income taxes, depreciation and amortization of intangible assets (which derives EBITDA), plus additional adjustments for loss on impairment of intangible assets and goodwill, stock-based compensation, income (loss) attributable to non-controlling interests, non-recurring severance, and other one-time costs. We use Adjusted EBITDA to evaluate core results of operations and trends between fiscal periods and believe that these measures are important components of our internal performance measurement process.
Current wording
We define Adjusted EBITDA as net income (loss) attributable to Innodata Inc. and its subsidiaries in accordance with U.S. GAAP before net interest expense (income), income taxes, depreciation and amortization of intangible assets (which derives EBITDA), plus additional adjustments for loss on impairment of intangible assets and goodwill, stock-based compensation, income (loss) attributable to non-controlling interests and other one-time costs. We use Adjusted EBITDA to evaluate core results of operations and trends between fiscal periods and believe that these measures are important components of our internal performance measurement process.
Previous wording
The following table contains a reconciliation of U.S. GAAP net income (loss) attributable to Innodata Inc. and its subsidiaries to Adjusted EBITDA for the three and nine-month periods ended September 30, 2025 and 2024 (in thousands).
Current wording
The following table contains a reconciliation of U.S. GAAP net income (loss) attributable to Innodata Inc. and its subsidiaries to Adjusted EBITDA for the three-month periods ended March 31, 2026 and 2025 (in thousands).
Previous wording
One customer in the DDS segment generated approximately 56% and 59% of the Company’s total revenues for the three months ended September 30, 2025 and 2024, respectively. No other customer accounted for 10% or more of total revenues during these periods. Further, revenues from non-U.S. customers accounted for 16% and 17% of the Company’s total revenues for the three months ended September 30, 2025 and 2024, respectively.
Current wording
One customer generated approximately 56% and 61% of the Company’s total revenues for the three months ended March 31, 2026 and 2025, respectively. Another customer generated approximately 17% of the Company’s total revenues for the three months ended March 31, 2026. No other customer accounted for 10% or more of total revenues during these periods. Foreign revenues from non-U.S. customers accounted for 12% and 16% of the Company’s total revenues for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
Adjusted gross profit was $78.0 million and $44.7 million for the nine months ended September 30, 2025 and 2024, respectively. The $33.3 million increase in adjusted gross profit was primarily due to higher revenues in the DDS and Agility segments, offset in part by higher direct operating costs in all segments. Adjusted gross margin was 43% and 40% for the nine months ended September 30, 2025 and 2024, respectively. The increase in adjusted gross margin was primarily due to higher revenues in the DDS and Agility segments, offset in part by higher direct operating costs in all segments.
Current wording
Gross profit was $39.8 million and $23.2 million for the three months ended March 31, 2026 and 2025, respectively. The $16.6 million increase in gross profit was primarily due to higher revenues, offset in part by higher direct operating costs. Gross margin was 44% and 40% for the three months ended March 31, 2026 and 2025, respectively. The increase in gross margin was primarily due to higher revenues, offset in part by higher direct operating costs.
Previous wording
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 and cloud service subscriptions; professional and consultant fees; provision for credit losses; and other administrative overhead expenses.
Current wording
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.
Previous wording
Net income was $23.3 million and $18.4 million for the nine months ended September 30, 2025 and 2024, respectively. The $4.9 million increase was a result of higher revenues in the DDS and Agility segments and higher interest income, offset in part by higher direct operating costs, higher selling and administrative expenses in all segments, and an increase in the income tax provision in the current period.
Current wording
Net income was $14.9 million and $7.8 million for the three months ended March 31, 2026 and 2025, respectively. The $7.1 million increase was a result of higher revenue, offset in part by higher direct operating costs and higher selling and administrative expenses in the current quarter.
Previous wording
Basic and diluted earnings per share were $0.74 and $0.67 compared to $0.64 and $0.55 for the nine months ended September 30, 2025 and 2024, respectively. A per share increase of $0.10 and $0.12, respectively. Despite the prior year tax benefit related to the utilization of net operating loss carryforwards, earnings per share increased for the nine-month period due to improved profitability and operating leverage, reflecting higher revenues and cost efficiencies across the business.
Current wording
Basic and diluted earnings per share were $0.46 and $0.42, respectively, compared to $0.25 and $0.22, respectively, for the three months ended March 31, 2026 and 2025, respectively, a per share increase of $0.21 for basic earnings per share and $0.20 for diluted earnings per share. Earnings per share increased for the quarter due to continued improvement in profitability and operating leverage, reflecting higher revenues and cost efficiencies across the business.
Previous wording
Adjusted EBITDA was $16.2 million and $13.9 million for the three months ended September 30, 2025 and 2024, respectively. The $2.3 million increase in Adjusted EBITDA was due to a higher income tax provision, higher stock-based compensation and higher depreciation and amortization, offset in part by lower net income and higher interest income in the current quarter.
Current wording
Adjusted EBITDA was $25.0 million and $12.7 million for the three months ended March 31, 2026 and 2025, respectively. The $12.3 million increase in Adjusted EBITDA was due to higher net income, higher stock-based compensation and depreciation and amortization, offset in part by higher interest income in the current quarter.
Previous wording
On September 30, 2025, we had cash and cash equivalents of $73.9 million, of which $20.7 million was held by our foreign subsidiaries, and $53.2 million was held in the United States.
Current wording
On March 31, 2026, we had cash and cash equivalents of $117.4 million, of which $16.0 million was held by our foreign subsidiaries, and $101.4 million was held in the United States.
Previous wording
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. As of September 30, 2025, we had working capital of approximately $75.3 million, as compared to working capital of approximately $41.5 million as of December 31, 2024. The increase in working capital is due to increased collections from higher revenues and proceeds from stock option exercises in the period, offset by capital expenditures during the period to build future capacity.
Current wording
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. As of March 31, 2026, we had working capital of approximately $104.0 million, as compared to working capital of approximately $84.9 million as of December 31, 2025. The increase in working capital is due to increased collections from higher revenues, offset in part by higher operating expenses associated with increased headcount to support higher volumes of AI-related services and expanded customer engagements.
Previous wording
Cash provided by our operating activities for the nine months ended September 30, 2025 was $33.9 million resulting from net income of $23.3 million, adjusted for non-cash expenses of $17.4 million and a decrease in working capital of $6.8 million. Refer to the Condensed Consolidated Statements of Cash Flows for further details.
Current wording
Cash provided by our operating activities for the three months ended March 31, 2026 was $37.3 million resulting from net income of $14.9 million, adjusted for non-cash expenses of $6.6 million and an increase in working capital of $15.8 million. Refer to the Condensed Consolidated Statements of Cash Flows for further details.
Previous wording
Cash provided by our operating activities for the nine months ended September 30, 2024 was $17.7 million resulting from net income of $18.4 million, adjusted for non-cash expenses of $1.9 million and a decrease in working capital of $2.6 million. Refer to the Condensed Consolidated Statements of Cash Flows for further details.
Current wording
Cash provided by our operating activities for the three months ended March 31, 2025 was $10.8 million resulting from net income of $7.8 million, adjusted for non-cash expenses of $4.9 million and a decrease in working capital of $1.9 million. Refer to the Condensed Consolidated Statements of Cash Flows for further details.
Previous wording
Cash used in our investing activities was $8.3 million and $5.5 million for the nine-month periods ended September 30, 2025 and 2024, respectively. 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 nine months ended September 30, 2025 amounting to $8.3 million consisted of $5.6 million for the DDS segment, $1.8 million for the Agility segment and $0.9 million for the Synodex segment.
Current wording
For each of the three months ended March 31, 2026 and 2025, cash used in our investing activities was $2.4 million. These capital expenditures were principally for the purchase of technology equipment including servers, network infrastructure and workstations, and expenditures for capitalized developed software.
Previous wording
During the next 12 months, it is anticipated that capital expenditures for capitalized developed software and ongoing technology, equipment and infrastructure upgrades will approximate to $11.0 million, a portion of which we may finance.
Current wording
During the next 12 months, it is anticipated that capital expenditures for capitalized developed software and ongoing technology, equipment and infrastructure upgrades will approximate to $12.1 million, a portion of which we may finance.
Previous wording
Cash provided by financing activities for the nine months ended September 30, 2024 was $0.2 million primarily from proceeds of stock option exercises of $0.8 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.
Current wording
Cash provided by financing activities for the three months ended March 31, 2026 was $0.9 million primarily from proceeds of stock option exercises of $1.0 million, offset in part by withholding taxes on net settlement of restricted stock awards of $0.1 million.
Previous wording
Cash provided by financing activities for the nine months ended September 30, 2025 was $1.1 million primarily from proceeds of stock option exercises of $1.5 million, offset in part by payment of long-term obligations of $0.4 million.
Current wording
Cash provided by financing activities for the three months ended March 31, 2025 was $0.9 million primarily from proceeds of stock option exercises of $1.0 million, offset in part by payment of long-term obligations of $0.1 million.
Previous wording
Our discussion and analysis of our results of operations, liquidity and capital resources is based on our condensed consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of the condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for credit losses and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, value of securities underlying stock-based compensation, litigation accruals, pension benefits, valuation of derivative instruments and estimated accruals for various tax exposures. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our condensed consolidated results of operations and financial position.
Current wording
Our discussion and analysis of our results of operations, liquidity and capital resources is based on our condensed consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of the condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for credit losses and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets and income tax provision, value of securities underlying stock-based compensation, litigation accruals, pension benefits, valuation of derivative instruments and estimated accruals for various tax exposures. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our condensed consolidated results of operations and financial position.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
One customer in the DDS segment generated approximately 58% and 44% of the Company’s total revenues for the nine months ended September 30, 2025 and 2024, respectively. No other customer accounted for 10% or more of total revenues during these periods. Further, revenues from non-U.S. customers accounted for 16% and 24% of the Company’s total revenues for the nine months ended September 30, 2025 and 2024, respectively.
Previous report — wording carried elsewhere
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, recruitment costs and other direct expenses that are incurred in providing services to our customers.
Previous report — wording carried elsewhere
Gross profit is derived by revenues less direct operating costs, while the Gross margin percentage is derived by dividing gross profit over revenues.
Previous report — wording carried elsewhere
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 and cloud service subscriptions; professional and consultant fees; provision for credit losses; and other administrative overhead expenses.
Previous report — wording carried elsewhere
Adjusted Gross Profit and Adjusted Gross Margin are non-GAAP financial measures. For a reconciliation of Adjusted Gross Profit and Adjusted Gross Margin to the most directly comparable GAAP measure, please see the description of “Non-GAAP Financial Measures – Adjusted Gross Profit and Adjusted Gross Margin” above.
Previous report — wording carried elsewhere
Adjusted EBITDA is a non-GAAP financial measure. 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.