INNODATA INC Q1 FY2025 earnings call

Jack Abuhoff noted Q1 2025 revenue growth and adjusted EBITDA growth. The company made progress on strategic growth initiatives: focused on generative AI training data with efforts in expanding expert domains and languages, having potential new customers and existing customer expansions; building agentic AI solutions for big tech and enterprise customers; won expanded engagements for generative AI trust and safety evaluations with potential recurring revenue. Marissa Espineli mentioned adjusted gross margin was 43% in Q1, up from 41% in Q1 last year, cash position at end of Q1 2025 was $66.6 million, and Q2 plan to invest approximately $2 billion to support a new statement of work with the largest customer, which may temporarily impact margins.

Q1 2025 revenue was $58.3 million, a year-over-year increase of 120%. Adjusted EBITDA for the quarter was $12.7 million or 22% of revenue, a 236% year-over-year increase. The company finished the quarter with $56.6 million of cash, a $9.7 million increase from the previous quarter. The $30 million credit facility remained undrawn.

Reaffirmed full year revenue growth guidance of 40% or greater. Q2 plan to invest approximately $2 billion to support a new statement of work and related programs with the largest customer, and this investment is expected to temporarily impact margins in Q2.

Customer concentration can result in quarter-to-quarter volatility. For example, with the largest customer, Q1 may exceed annualized revenue run rate, but Q2 could be lower due to dynamic demand signals and changing needs.

Q: George Sutton asked about the statement of work with the largest customer and win rate.

A: Jack Abuhoff said the new SOW allows using another division of the customer's gen AI spend with a higher budget, and win rate is high as they start small, build trust, then expand.

Q: Allen Klee asked about sequential revenues from the largest customer and spending changes.

A: Jack Abuhoff explained quarter-to-quarter volatility is due to dynamic demand signals and the strategic choice to grow across the customer base.

Q: Hamed Khorsand asked about how much projects were in the guidance.

A: Jack Abuhoff said guidance is conservative as new customers and dynamic demand make growth estimates cautious but prefer to surprise on the upside.