Innodata Q1 2025 Earnings Report

Innodata EPS Results

• Actual EPS: $0.22
• Consensus EPS: $0.17
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: N/A

Innodata Revenue Results

• Actual Revenue: $58.34 million
• Expected Revenue: $57.64 million
• Beat/Miss: Beat by +$709.00 thousand
• YoY Revenue Growth: +120.10%

Innodata Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Innodata (NASDAQ:INOD) operates as a global data engineering company in the United States, the United Kingdom, the Netherlands, Canada, and internationally. The company operates through three segments: Digital Data Solutions (DDS), Synodex, and Agility. The DDS segment engages in the provision of artificial intelligence (AI) data preparation services; collecting or creating training data; annotating training data; and training AI algorithms for its customers, as well as AI model deployment and integration services. This 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 offers an industry platform that transforms medical records into useable digital data with its proprietary data models or client data models. The Agility segment provides an industry platform that offers marketing communications and public relations professionals to target and distribute content to journalists and social media influencers; and to monitor and analyze global news channels, such as print, web, radio, and TV, as well as social media channels. It serves banking, insurance, financial services, technology, digital retailing, and information/media sectors through its professional staff, senior management, and direct sales personnel. The company was formerly known as Innodata Isogen, Inc. and changed its name to Innodata Inc. in June 2012. Innodata Inc. was incorporated in 1988 and is headquartered in Ridgefield Park, New Jersey.

Innodata Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 Innodata reported $58.3 M in revenue, up 120% YoY, with adjusted EBITDA of $12.7 M (22% margin), beating analyst estimates and ending the quarter with $56.6 M in cash.
• The company is scaling its generative AI training data capabilities by expanding expert domains (e.g., math, chemistry) and languages (Arabic, French) to support LLMs as they advance toward AGI and ASI.
• Innodata is onboarding four major new clients—a global cloud powerhouse, a CRM leader, a Chinese tech conglomerate, and a healthcare imaging company—and has a pipeline valued at over $25 M with an existing top software customer alongside multiple big-tech expansion opportunities.
• It is growing its generative AI trust and safety services and has introduced an enterprise-grade AI test and evaluation platform, now in early access with charter customers and under discussion for strategic distribution partnerships.
• The company reaffirmed its full-year revenue growth guidance of 40%+, plans to reinvest significant cash flow into product innovation and go-to-market expansion, and expects a temporary $2 M margin impact in Q2 ahead of related revenue.

Presentation

[Operator]

This call is being recorded on Thursday, 05/08/2025. I would now like to turn the conference over to Amy Aggress, General Counsel at InnoData Inc. Please go ahead.

[Amy Agress, Senior Vice President and General Counsel at Innodata]

Thank you, Lovely. Good afternoon, everyone. Thank you for joining us today. Our speakers today are Jack Apohawk, CEO of Innodata and Mariz Espinelli, Interim CFO. Also on the call today is Anish Pantarkar, Senior Vice President, Finance and Corporate Development.

[Amy Agress, Senior Vice President and General Counsel at Innodata]

We'll hear from Jack first, who will provide perspective about the business, and then Mariz will follow with a review of our results for the first quarter. We'll then take questions from analysts. Before we get started, I'd like to remind everyone that during this call, we will be making forward looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations, assumptions and estimates and are subject to risks and uncertainties. Actual results could differ materially from those contemplated by these forward looking statements.

[Amy Agress, Senior Vice President and General Counsel at Innodata]

Factors that could cause these results to differ materially are set forth in today's earnings press release, in the Risk Factors section of our Form 10 ks, Form 10 Q and other reports and filings with the Securities and Exchange Commission. We undertake no obligation to update forward looking information. In addition, during this call, we may discuss certain non GAAP financial measures in our earnings release filed with the SEC today as well as in our other SEC filings, which are posted on our website, you will find additional disclosures regarding these non GAAP financial measures, including reconciliations of these measures with comparable GAAP measures. Thank you. I will now turn the call over to Jeff.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Thank you, Amy, and good afternoon, everyone. Our Q1 twenty twenty five revenue was $58,300,000 a year over year increase of 120. Our adjusted EBITDA for the quarter was $12,700,000 or 22% of revenue, a 236% year over year increase. We finished the quarter with $56,600,000 of cash, which is a $9,700,000 increase from last quarter. Our $30,000,000 credit facility remains undrawn.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We're pleased with our financial results this quarter, which, by the way, came in ahead of analyst revenue estimates. But what's even more exciting is the meaningful progress we've made on our strategic growth initiatives, much of it in just the past few weeks. I'd like to take this opportunity to walk you through the progress we're making across four of our most dynamic solutions areas, highlighting how we're aligning with the evolving customer needs and how these efforts are driving both new customer wins and meaningful account expansions. Let's first look at the work we do collecting and creating generative AI training data. We are very focused on building progressively more robust capabilities to feed the progressively more complex data requirements of large language models as they advance toward artificial generalized intelligence, or AGI, and eventually, artificial superintelligence, or ASI.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We have made and we continue to make investments toward expanding the diversity of expert domains like math and chemistry, for which we create LLM training data and perform reinforcement learning, while also investing in expanding languages like Arabic and French within these domains and creating the kinds of data required to train even more complex reasoning models that can solve difficult multistep problems within these domains. We're also developing progressively more robust capabilities to collect pretraining data at scale. The advancements that we have made and continue to make and the investments we have made and continue to make have enabled us to gain traction with both existing customers and potential new customers. I'll take potential new customers first. We're in the process of being onboarded by a number of potentially significant customers.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

I'm going to share four of them with you now. The first is a global powerhouse building mission critical systems that power everything from multinational finance and telecommunications to government operations and cloud infrastructure. It is integrating large language models and AI across its cloud infrastructure and enterprise applications to enhance automation, productivity and decision making and also embeds generative AI directly into horizontal and vertical applications. The second is a cloud software company that has revolutionized the way businesses manage customer relationships. It is leveraging large language models and AI to enhance customer relationship management and enterprise operations and has taken a leadership position in launching agentic AI capabilities to autonomously handle complex enterprise tasks.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

The third is a Chinese technology conglomerate that operates one of the world's largest digital commerce ecosystems. It has built its own family of LLM models, incorporating hybrid reasoning capabilities and supporting multiple modalities, including text, image, audio and video. Its models are widely in use for a variety of horizontal applications as well as industry specific applications. And the fourth is a global health care company that is a leader in advanced medical imaging, diagnostics and digital health solutions. It is actively integrating LLMs and AI to enhance diagnostics, streamline clinical workflows and improve patient outcomes, developing foundation models capable of processing multimodal data, including medical images, records and reports.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Now when it comes to existing customers, we're seeing major expansion opportunities, some we've already won and others we expect to win in the near term. I'll share a few examples to illustrate the kind of traction we are now seeing. I'll start with three of our big tech customers, which, until recently, were relatively small accounts for us but which are now showing signs of meaningful expansion. I'll also touch on the continued strong momentum we're seeing within our largest customer. The first example is a customer we started working with in the second quarter of last year.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Now in 2024, we recognize only about $400,000 of revenue from them. But today, by contrast, we have late stage pipeline that we value as having the potential to result in more than $25,000,000 of bookings this year and continued growth over the next several years. This customer is one of the most valuable software companies in the world. The problem we are helping them solve is that their generative AI, both text and image, has not been doing a good job handling very specific, detailed and complex prompts. They shared with us that improving on these fronts was critical in order to improve product experience and provide a foundation for multimodal reasoning and agentic models of the future.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

So here's a great example of an investment we are making that has specifically resulted in traction with this customer. We developed an innovative data generation pipeline that enables domain experts to create detailed hierarchical content labels across modalities while continuing to evolve the underlying taxonomies. Our approach supports multiple types of GenAI workflows, including detailed descriptions, reverse prompting and highly specific evaluations. The second example of an existing customer, which we're seeing major expansion, is a Big Tech with which we just had $200,000 of revenue last year. But again, by contrast, today, we are actively collaborating with them, resulting in two new wins in Q2 to date, one signed and one we believe is about to be signed that we value at approximately $1,300,000 of potential revenue.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We also have another opportunity with them that we value at about $6,000,000 in potential revenue. It's in the pipeline, and I'll talk about that more in a few minutes. The third example is a big tech hyperscale with extensive generative AI capabilities across both its consumer and enterprise businesses, where it offers foundational models together with custom silicon optimized for AI workloads. We believe we will soon be engaged by it to support pre training data collection for very specific specialized models. We'll also talk in a few minutes about additional expansion that we're driving at this account in terms of model safety and evaluation.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

The fourth example is one of the most highly regarded generative AI labs. We just signed a new data collection deal with them. We value it approximately $900,000 of potential revenue, and we're discussing an expansion that could potentially double that. Pre training data collection in the form of curated text to Kapoora as well as multimodal data sets remains a cornerstone for big tech companies racing to build next generation LLMs. As models grow more sophisticated, their performance hinges not just on raw computational power, but also on the breadth, depth, and quality of the data they are trained on.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Continuous data acquisition enables the models to better understand nuance, context, and intent across languages and domains. We believe that each of the companies I just mentioned is likely budgeting several hundred million dollars per year on generative AI data and model evaluation. So the traction we are now seeing is super exciting and is very much the result that we have been working toward under our business plan. Lastly, we also see expansion opportunities with our largest customer. Literally, just this morning, we signed a second master SOW with our largest customer that we anticipate will enable us to deliver Gen AI services funded from a distinct budget category within the customer's organization, separate from the budget that supports our existing engagements.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We believe this new budget to be materially larger. Now to prepare ourselves to deliver services under this new SOW, we are making investments in customizing our proprietary LLM data annotation platforms, specifically for the work that will be required under this new SOW, and we are building some additional service support capabilities. Another major area of strategic focus for us is building agentic AI solutions for our big tech customers as well as our enterprise customers. With one of our smaller Big Tech relationships, one that I discussed a few minutes ago, we have begun a collaboration around both AI agent data set creation and AI agent building. The work we are hoping to kick off with them this quarter will involve creating approximately 200 conversational and autonomous agents across multiple domains.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

The work involves defining use cases, developing synthetic knowledge, Kepora, generating demonstration datasets, building and debugging agents, and then managing agent orchestration. We believe this opportunity has the potential to be worth approximately $6,000,000 to start. We believe agent based AI is going to serve as the cornerstone technology that unlocks the full value of large language models and generative AI for enterprises, transforming them from powerful but isolated tools into autonomous goal driven systems that can reason, take action, and drive measurable business outcomes at scale. Ingenetic AI refers to artificial intelligence systems that can autonomously initiate and carry out complex tasks in pursuit of specified goals with minimal ongoing human input. These systems go beyond reactive execution.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

They exhibit goal oriented behavior. They make decisions. They adapt to changing context, and they even take initiative to achieve outcomes. In contrast to traditional AI, which typically responds to prompts or instructions, AgenTeq AI is designed to operate with a degree of independence, managing multistep processes, reasoning through uncertainty, and dynamically adjusting actions based on feedback. It represents a shift from AI as a tool to AI as a collaborator, one that can understand objectives, plan strategically and act accordingly.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Now on the subject of unlocking value for enterprises, in the last several months, we have won engagements that we value at approximately $1,600,000 helping one of the world's largest social media companies integrate GenAI into their engineering operations. We were in active discussions about expanding this successful effort to other business units within the customer as well. We are providing integration services, prompt engineering, program management and on-site consulting for implementing generative AI. So far, we have automated five workflows, which we estimate will help our customer generate approximately $6,000,000 in cost savings. The plan is to automate about 60% of 90 identified workflows by the end of twenty twenty five.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

And for this to result in at least £10,000,000 of additional savings for this customer this year while providing additional benefits in terms of reduced friction and increased development velocity as the engineering team can more rapidly prototype, test and refine solutions. We are also in advanced discussions with several other companies about helping them use generative AI to enhance both products and operations. And we've discussed how our investments and expanded capabilities in LLM training data creation and Agentic AI are fueling a surge in customer engagement. We're seeing that same momentum carry over into the work in generative AI trust and safety, marking a significant expansion of our presence in a fast growing mission critical segment of the market. We are pleased to announce that we have won expanded engagements to provide trust and safety evaluations for one of our existing Big Tech customers, again, not our largest customer, but one of the smaller relationships that's now successfully expanding.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

The engagements together have a potential value of approximately $4,500,000 of what we believe will be annual recurring revenue. We just started ramping the engagements up a couple of weeks ago. We anticipate working across several of their divisions spanning English, Spanish, German and Japanese languages. We anticipate providing ongoing testing of both their public models as well as their beta models that they have not yet launched. Under these engagements, we anticipate testing both generic models and domain specific models as well.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

For example, we might help ensure that a model trained to assist chemists and nuclear scientists who refused to provide advice on how to build a bomb or create crystal meth. Again, our willingness and insight to make investments proved critical in enabling us to capture this opportunity. We bolstered our proprietary trust and evaluation platform with some innovative features that our customer found compelling. Just last week, the customer completed security reviews of our platform, enabling us to start work this week. We believe there is a near term potential to expand further our trust and safety work with this customer.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We intend to be running paid pilots for other trust and safety workflows over the next few months. And to support this opportunity, we've invested in methodologies for predicting emerging areas of user interaction with advanced language models, enabling us potentially to proactively surface and address high risk topics for trust and safety assessment. We recently demonstrated this capability to our customer who responded with strong enthusiasm. Notably, part of these engagements involve evaluating LLMs embedded in physical devices and robotics with which our teams will be working directly in our customers' labs to test performance at the hardware level. With another enterprise customer, one that I mentioned earlier, we have been shortlisted as lead vendor for a multiyear program aimed at evaluating the customer's generative AI foundation models for potential harms, bias and robustness.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We anticipate the annual recurring revenue of this engagement is one, to be approximately $3,300,000 We are currently conducting proofs of concept that encompass adversarial testing, model probing and early stage fine tuning pipelines. The proposed production scope includes comprehensive red teaming, implementation of guardrails and rigorous evaluation model behavior across text, image, video and audio outputs. In the first quarter, we introduced our generative AI test and evaluation platform at NVIDIA's GTC twenty twenty five. This enterprise grade solution is designed to assess the integrity, reliability and performance of large language models across the full development life cycle, from predeployment refinement to post deployment monitoring, enabling both internal operational use cases and external customer facing applications. MasterClass served as our inaugural charter customer, and we are now in active discussions with several additional high profile enterprises with diverse generative AI deployments.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

In addition, we are in active discussions with one of the world's leading global consulting firms regarding a potential go to market partnership that would position them as a strategic distribution and implementation channel for our platform. From a competitive differentiation standpoint, the platform encapsulates a range of advanced techniques developed through our ongoing services engagements with leading big tech customers. These capabilities are now productized into an autonomous system that allows enterprises to benchmark, evaluate, and continuously monitor their agents and foundation models. The platform supports evaluation against high quality standardized benchmarks across key safety dimensions, including hallucination, bias, factual accuracy and brand alignment, while also enabling customization through client specific safety vectors and proprietary evaluation criteria. A key feature of the platform is its continuous attack agent, which autonomously generates thousands of adversarial prompts and conversational probes to uncover vulnerabilities in real time.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Detected issues are flagged for review, allowing customers to take swift remedial action. Recommended mitigation strategies may include tailored system message design and the generation of supplemental fine tuning data sets. The platform is currently available through an early access program for enterprise customers with general availability targeted for late Q2. Breast and safety evaluation is critical at both the development and production stages of large language models. During development, rigorous testing, including adversarial red teaming, is essential to uncover vulnerabilities, biases and harmful behaviors before models are deployed.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

This proactive approach enables developers to build safety guards into the model architecture and fine tuning processes. In production, continuous evaluation ensures that the models remain aligned with safety standards as they interact with real users and evolving contexts. Together, these measures are vital for ensuring that LLMs operate responsibly, mitigate risk, and maintain user trust at scale. We believe the rapid adoption of agentic and multi agent systems will push us to a new phase of complexity when it comes to trust and safety. In our most recent quarterly earnings reports, the magnificent seven technology companies, Apple, Microsoft, Amazon, Alphabet, Meta, NVIDIA and Tesla, have each underscored their commitments to generative AI investment, viewing it as a pivotal component of their future growth strategies.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Microsoft has announced plans to invest approximately $80,000,000,000 in AI infrastructure during fiscal twenty twenty five, aiming to build data centers designed to handle artificial intelligence workloads. Meta has raised its capital expenditure guidance to $64,000,000,000 to $72,000,000,000 for 2025, reflecting increased investment in AI infrastructure, including the development of new AI tools such as Lama four and a standalone AI assistant app. Amazon is expanding its AI capabilities, particularly within its cloud computing division, AWS. In his annual letter to shareholders, the Amazon CEO emphasized the company's aggressive investment in AI, writing, We continue to believe AI is a once in a lifetime reinvention of everything that we know. Alphabet, meanwhile, reported a 20% increase in operating income and a 46% rise in net income in Q1 twenty twenty five, attributing this growth to its unique full stack approach to AI, which encompasses infrastructure, models and applications.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Given the sentiment and the significance of the Magnificent Seven and other large global technologies to our revenue stream, We do not believe that short term business cycles or trade policies have much of an impact on our business prospects. It is worth noting how bullish sophisticated venture capital investors are on our sector. Our largest direct competitor is reported to be close to finalizing a secondary stock sale, valuing the company at $25,000,000,000 a multiple of 29x last year's reported revenue of $870,000,000 which came with reported EBITDA loss of $150,000,000 Today, we are reaffirming our full year revenue growth guidance of 40% or greater. As the breadth of activity across our business illustrates, we believe the current momentum positions us well for continued strong performance. I want to say something about how we intend to manage the business over the next couple of years.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Our intention is to embrace growth from both the broadening customer footprint and our largest customer. I've shared with you today how we are achieving significant success with the diversity of large customers that we believe could become material contributors over the coming fiscal periods. At the same time, we also see significant growth potential with our largest customer. We believe this customer will continue to expand its overall relationship with us, and we are deeply aligned with its long term road map. Given that we intend to drive growth from this broadening customer footprint and our largest customer at the same time, we intend to embrace customer concentration as a natural part of our evolution.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Many leading technologies companies have seen similar patterns. An early period of customer concentration followed by a broad based growth as the value proposition matures and adoption scales. We believe we are following that same path and remain confident in our ability to continue executing with discipline while building a durable diversified revenue engine. Inevitably, customer concentration can result in quarter to quarter volatility. For example, with our largest customer, we exited 2024 at an annualized revenue run rate of approximately $135,000,000 In Q1, we were running higher than this by about 5%.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

And in Q2, we anticipate that we could be lower by about 5%. But the customers' demand signals are updated continually and are highly dynamic. Going forward, we do not intend to provide granular updates at a customer level. Our 2025 financial plan reflects our conviction in the scale of the opportunity ahead. We believe we are well positioned to drive business with an increasingly diverse group of leading big tech companies and enterprises and become a market leader in one of the most transformative technology cycles in decades.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Accordingly, we intend to reinvest a meaningful portion of our operating cash flow into product innovation, go to market expansion and talent acquisition, while still delivering adjusted EBITDA above our 2024 results. This too is an intentional strategy aimed at capturing long term value in a rapidly growing and strategically important market. I'll now turn the call over to Mariz to go over the financial results, after which Mariz, Anish and I will be available to take questions from analysts.

[Marissa Espineli, Interim Chief Financial Officer at Innodata]

Thank you, Jack, and good afternoon, everyone. Revenue for Q1 twenty twenty five reached $58,300,000 representing a year over year increase of 120 percent and demonstrating strong momentum to start the year. Adjusted gross margin was 43% for the quarter, up from 41% in Q1 of last year. As we've discussed previously, we target an adjusted gross margin of around 40%. So we're pleased to have exceeded that benchmark to begin the year.

[Marissa Espineli, Interim Chief Financial Officer at Innodata]

Our adjusted EBITDA for Q1 twenty twenty five was $12,700,000 or 22% of revenue compared to $3,800,000 in the same quarter last year. Net income was $7,800,000 in the first quarter, up from $1,000,000 in the same period last year. We were able to utilize the benefits of accumulated net operating losses or NOLCO in Q1 to partially offset our tax provision. Looking ahead, barring any changes in the tax environment, we expect that our tax rate in the coming quarters to be approximately 29%. Our cost position at the end of Q1 twenty twenty five was $56,600,000 up from $46,900,000 at the end of Q4 twenty twenty four and $19,000,000 at the end of Q1 twenty twenty four, reflecting strong profitability and disciplined cash management.

[Marissa Espineli, Interim Chief Financial Officer at Innodata]

We still have not drawn on our $30,000,000 Wells Fargo credit facility. The amount drawable under this facility at any point in time doesn't mean based on the borrowing base formula. We've been actively engaged in investor relation activity over the past year and expect to build on that momentum in the months ahead. We'll be participating in several upcoming investor conferences and non bill road shows to continue to increase awareness and deepen relationships with institutional investors. Looking ahead, as Jack mentioned, we're planning targeted investments to expand our capabilities.

[Marissa Espineli, Interim Chief Financial Officer at Innodata]

This includes continued investment in technology to support both current and prospective customers in their AI journey as well as increasing strategic hiring in sales and solutioning to drive long term growth. In Q2, we plan to invest approximately $2,000,000 to support a new statement of work and related programs with our largest customer, as Jack noted earlier. We expect that this investment will occur ahead of the associated revenue and is expected to temporarily impact margins in that quarter. We did view this as a strategic investment that helps position us to meet customers' evolving needs and to build on the land and expand success we've already achieved with them. As always, we'll remain disciplined in managing our cash and expenses while continuing to invest where we see strong return potential and meaningful long term value for shareholders.

[Marissa Espineli, Interim Chief Financial Officer at Innodata]

That's all from my end, and thanks, everyone. Lovely, we're ready to take questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Followed by the number one on your touch tone phone. You will hear a pump that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two.

[Operator]

If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from the line of George Sutton from Craig Hallum. Your line is now open. Please go ahead.

[George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC]

Thank you, and thanks for all the detail on the pipeline. So Jack, I wonder if you could walk through this statement of work with your largest customer. If I understood correctly, you suggest it could be larger and then you sort of cut off from them. So what would larger van be relative to the statement of work opportunity?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Sure. Well, thank you for the question. The statement of work will enable our customer to start using us in basically what you can think of as another division or another area of their Gen AI spend. Up until now, we haven't been supporting that area. With this new SOW in place, we will be and we expect to be.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

What's notable about that is that this the budget associated with that new area, we believe to be significantly higher than the budget that has been supporting all of our programs to date. So we're very excited about that.

[George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC]

And obviously, what you're suggesting in terms of the sequential revenues from this customer in Q2, which could be down 5%, that is completely separate from the statement of work that would be meaningfully in addition to, correct?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

I think it's the requirements of this customer are very dynamic. We learn about things almost multiple times in the course of even a week. So what we're going to do is bake all of that into the guidance that we're providing. I just want to make sure that as people see that we were up in Q1, you don't necessarily take that and assume that that's like a new threshold. We think in any quarter there are projects that end, there are new projects that start.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

So in terms of the new SOW, there's clearly a greater amount of work that we can do. There's additional share of wallet that we can tap into. And I think that bodes very well for long term continuing to grow that account.

[George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC]

So you walked through a number of different customer opportunities and gave a good sense of the size of the opportunities. Can you give us a sense of what you're finding your win rate to be when you go into these opportunities?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Yeah. You know, win rate is a hard thing to track. For us, the most important thing is to, you know, get into a customer, start doing, you know, small requirements, build trust, execute very, very well, and then expand, you know, from there. I think the the the things that how do I put this the things that we end up piloting that proceed, that move forward with customers and some things don't, some things are experimental. But the things that move forward, we win a very large percentage of those, I believe.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

So we're what's so exciting about what's going on now in the business is for a while, we've been talking about these multiple big tech customers and multiple magnificent seven customers that we've got, but some of them have been small. There are a couple of that were only $200,000 of revenue last year or $400,000 of revenue last year. And our plan was to get in there, prove ourselves, build trust and then tap into the hundreds of millions of dollars that are being spent on data engineering. What we're seeing now and the reason we're just so excited by all of this is our plan is coming together. We're doing exactly what we plan to do, and we're super excited about that.

[George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. Thanks. I'll turn it over to others.

[Operator]

Your next question comes from the line of Alan Klee from Maxim Group. Your line is now open. Please go ahead.

[Allen Klee, MD, Equity Research Analyst, TMT at Maxim Group]

Yes. Hi, great quarter. George actually asked my questions, but I'll try to come up with some others. Can you remind us what you said some stuff last quarter related to the size of the largest customer. I'm just trying to think about the impact of them being down 5%. I I think last quarter, you said you that with a win of 24,000,000 of annual, they're at around a hundred and 35,000,000 in revenue. I guess that means annually. But that annual run rate grew 5% this quarter, but then we'll be down 5% next quarter.

[Allen Klee, MD, Equity Research Analyst, TMT at Maxim Group]

Is is that the way to think of it, or am I mixing things up? Thank you.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Yes. So I think the way we're encouraging everyone to think about it is to understand how we intend to manage the company. We believe we have an incredible opportunity to drive growth through many of these broadening customer engagements that I described. We think that will be one source of growth, a very important source, obviously. But at the same time, we don't intend to take our foot off the accelerator with respect to driving considerable growth, hopefully, at our largest customer.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

That's a choice that we're making. We don't have to do that. We could choose lower revenue concentration as an alternative and cut back on that. But we're very plugged in with that customer. We've got a great relationship.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We're very tied into the things that we're doing, and we intend to that's the choice we're making. We intend to, you know, grow that as well. We believe there's lots of precedent in the market for, you know, embracing customer concentration as a natural part of that evolution. You know, we've seen that at many tech companies over the years and, you know, recently at, you know, Snowflake and Datadog, even Palantir. You know, we think over time as we execute this plan, you know, it'll result in broad based growth.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

In the interim, there will be quarter to quarter volatility. Specifically, what you're referring to, I think, is last year in Q4, we announced that we had $135,000,000 annualized revenue run rate with that customer. But the fact is, in Q1, we exceeded that. In Q2, we might be lower than that, but we don't really know because of how dynamic the demand signals are and how their needs are changing all the time. We think that that quarter to quarter volatility, some quarters up, some quarters down, is going to be a natural part of what to expect by virtue of the strategic choice we're making to drive growth across the board with our customer base and to respond to the tremendous growth opportunities that we see.

[Allen Klee, MD, Equity Research Analyst, TMT at Maxim Group]

That's great. I guess, just in general, for training, there's no chain it it sounds like you have a ton of opportunities, and it's expanding. And and safety sounded really interesting because that gives you a recurring revenue. Is there just is is there a way that people are spending money more differently with you now than maybe they had a year ago?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

I I think what we're seeing across our roster of big tech companies is a willingness and a desire to do more with us. And I think we earned our way, you know, and built trust over time. It takes a while to do it, but, you know, we're we're now seeing the fruition of those efforts, which, again, is super exciting. Trust and safety is you know, obviously, it's a it's a huge opportunity. It's an opportunity that becomes, you know, even richer and more interesting as we think about the complexity and and and richness of technology ecosystems that are are populated by, you know, agents potentially.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Well, each one of those agents will need to be measured and monitored and assessed. It's huge opportunity for us. And the competitive advantage we think we have is we've been doing trust and safety work now for several of our large customers, and that's expanding. And we've developed techniques that we can take to, you know, to to to to, test models and evaluate models, and we can build those techniques into a platform. And we can build that platform in a way that runs on a automated continuous basis, providing real time feedback to people.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

So, yeah. No. We're we're super excited about that. I think you're right. You you point out a very important point.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We believe that these opportunities on the services side and, hopefully, on the platform side as well will be recurring. We think that there'll be an ongoing need for that as the technology becomes more pervasive within the our company's ecosystems, for sure.

[Allen Klee, MD, Equity Research Analyst, TMT at Maxim Group]

That's great. Thank you so much.

[Operator]

Your next question comes from the line of Hamed Khorsand from Beating Wall Street Financial. Your line is now open. Please go ahead.

[Hamed Khorsand, Principal at Beating Wall Street(BWS)]

Hi. I was just wondering, quarter, you gave this guidance of 40% growth. How much of these projects that you're talking about today were you expecting within that guidance?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Yes. When we give guidance, we try to take a long view.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We look at what's booked. We take a conservative view of what we think expansions can be. On our largest accounts, we estimate based on demand signals from the customer. Those are highly dynamic, as we've said. Of course, our predictions will only be perfect in retrospect.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We know that. But we try to do our best. And we try to be reasonably conservative as because we don't want to be wrong. We'd much rather surprise on the upside. So some of the accounts that I'm describing, especially the new relationships, they're not baked in at all.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

There's so much that we don't know about from how long will it take, what will it look like. So, again, out of an abundance of caution and a desire not to be wrong, we don't, as a practice, at least we try not to get ahead of our skis on any of that.

[Hamed Khorsand, Principal at Beating Wall Street(BWS)]

Yes. So that's what I was getting to, that you have these all these projects in the funnel as far as revenue opportunity. Why keep the guidance at 40% growth? What makes you nervous that you can't grow faster?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Well, it's a little bit like this. If we take some of the new customers that we're now onboarding, we don't necessarily know. Even though these are exciting customers and we think there's huge opportunities, we don't know necessarily how fast are we going to be able to convert that into opportunity. Are they going to want to work with us for a while before really opening the spigot, or is the spigot going to open more quickly?

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We've seen customers where they move fast. We've seen customers that require, you know, getting to know us for a while. With our largest, you know, customers, as I said, the demand is very dynamic. It changes very quickly. So again, what we're looking to do is be conservative.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We're looking to not be wrong in our growth estimates. And if we can meaningfully surprise on the upside like we did last year, then we'd prefer to it in that direction.

[Hamed Khorsand, Principal at Beating Wall Street(BWS)]

Okay, great. Thank you.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Thank you.

[Operator]

There are no further questions at this time. Please continue, Mr. Jakobuha.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Thank you. So Q1 was a great quarter with 120% year over year growth. And while revenue was flat sequentially, we want to be crystal clear. We believe our business right now is on fire. The growth we're seeing year over year is just the beginning. What's happening now inside the company is really like or unlike anything we've seen before.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

We're winning major new customers. We're expanding existing relationships into entirely new budget categories. We're building a pipeline that's deeper and more advanced than at any point in our history. It feels like the engine is fully lit, and we're accelerating down the runway. Our teams are energized.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

Our customers are leaning in, and, you know, our conviction in what comes next has never been stronger. So thanks, everyone, for joining us today, for being part of our journey. My executive team and I are all in on building Innodata into one of the defining AI solutions companies of the era. And we're excited to keep sharing our progress with you as the year unfolds. We're focused on delivering long term value for shareholders.

[Jack Abuhoff, CEO & Co-Founder at Innodata]

And with the momentum that we're seeing, we've never been more confident about what lies ahead. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Amy Agress, Senior Vice President and General Counsel
• Jack Abuhoff, CEO & Co-Founder
• Marissa Espineli, Interim Chief Financial Officer

Analysts

• George Sutton, Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC
• Allen Klee, MD, Equity Research Analyst, TMT at Maxim Group
• Hamed Khorsand, Principal at Beating Wall Street(BWS)