Innodata Inc. Q3 FY2025 earnings call

Jack Abuhoff noted the third quarter was a record quarter with strong business momentum. Innodata has continued to deepen relationships with high dollar value big tech customers, with deal momentum accelerating. There are six new 2025 initiatives: creating pretraining data at scale with potential revenue of approximately $68 million; launch of Innodata Federal, a government-focused business unit with an initial project expected to be ~$25 million in revenue mostly in 2026; advancing in the sovereign AI market with expected strategic partnerships; enterprise AI practice gaining traction with projects like helping a social media platform and a hyperscaler; work on Agentic AI, including evaluating and refining autonomous agents; and focus on model safety, with work like stress testing a chip company's multimodal AI products. Rahul Singhal emphasized deepening relationships with customers and the potential of the enterprise AI services market being 10 times larger than the model builder market.

Third quarter revenue for Innodata was $62.6 million, representing a 20% year-over-year organic growth and a 7% sequential quarterly growth. Adjusted EBITDA was $16.2 million, which is 26% of revenue, up 23% sequentially. Cash rose to $73.9 million, an increase of $27 million since year-end and $14.1 million since the last quarter.

Reiterates prior guidance of 45% or more year-over-year growth in 2025 and anticipates potentially transformative growth in 2026. The confidence is based on growth from existing strategic vectors and strong early returns from new investment areas.

Factors that could cause results to differ materially are set forth in the earnings press release in the Risk Factors section of Form 10-K, Form 10-Q and other reports and filings with the SEC. No specific operational failures discussed in detail but general risk factors mentioned.

Q: Allen Klee asked about potential contract wins and their breakdown in 2026.

A: Jack Abuhoff said contracts are considered for annualized recurring revenue and some will ramp up in the quarter but primarily fall into 2026.

Q: George Sutton asked about the federal market win and GSA process.

A: Jack Abuhoff said the timing is ideal due to government's AI emphasis and procurement liberalizations.

Q: George Sutton also asked about the federal market and FedRAMP.

A: Jack Abuhoff mentioned the government's strategic emphasis on AI and liberalizations in procurement make it an ideal time for Innodata Federal.