INNODATA INC (INOD)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $59.2M, up 127% YoY, and above the company’s guidance range of $52–$55M; adjusted EBITDA was $14.1M (23.9% margin) and diluted EPS was $0.31 .
• Management guided to “40% or more” revenue growth for 2025, with adjusted EBITDA expected to grow YoY; cash ended Q4 at $46.9M with an undrawn $30M credit facility .
• Strategic wins: +$24M annualized run-rate expansion with the largest customer (total run-rate ≈$135M) and accelerated growth with seven other Big Tech customers (+159% sequential); Q4 included $3M pre-training data work and two LLM trust & safety programs (~$3.6M annualized) .
• Margin catalysts included a high-margin Big Tech project and Synodex cost optimization; adjusted gross margin reached 48% (vs. 44% in Q3) while GAAP gross margin was 45.2% (vs. 40.8% in Q3, 34.8% in Q4 2023) .

What Went Well and What Went Wrong

• What Went Well

  • Record Q4 and FY results with revenue and profitability inflecting; “Q4 was a record quarter and 2024 was a record year… forecast 40%+ revenue growth in 2025” (CEO) .
  • Customer traction broadened: +$24M run-rate expansion with the largest Big Tech customer (run-rate ≈$135M) and 159% sequential growth from seven other Big Tech customers, validating “land-and-expand” strategy .
  • Product/platform momentum: two LLM trust & safety engagements (~$3.6M annualized) and progress toward an automated trust & safety platform with beta expected in Q2 2025 .

• What Went Wrong

  • Revenue concentration remains high in DDS and with the largest customer, raising diversification concerns despite improvement elsewhere .
  • GAAP vs. adjusted margin discrepancy (45.2% vs. 48%) highlights sensitivity to mix; management targets ~40% adjusted gross margin for net new opportunities, acknowledging “puts and takes” in 2025 .
  • S&P Global consensus estimates were unavailable during this session, limiting external beat/miss benchmarking; comparisons rely on company guidance and internal presentations (disclaimer below).

Financial Results

Quarterly progression (sequential comparison)

Year-over-year Q4 comparison

Segment revenue breakdown

Segment adjusted EBITDA (Q4)

KPIs and balance sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Q4 was a record quarter and 2024 was a record year… we are now forecasting 40% or more revenue growth for 2025” – Jack Abuhoff, CEO .
• “We were awarded additional programs… valued at approximately $24 million of annualized run rate revenue… expanding total annualized run rate revenue with this customer to approximately $135 million” .
• “Aggregate revenues from our seven other Big Tech customers grew by 159% in Q4 over Q3 2024” .
• “Adjusted gross margin was 48%… driven by a high-margin Big Tech project and Synodex automation and cost optimization” – Marissa Espineli, Interim CFO .
• “We won two LLM trust and safety engagements… approximately $3.6 million annualized run-rate; beta release of automated trust & safety platform expected in Q2” – CEO .

Q&A Highlights

• Diversification and pilots: pilots across additional Big Techs and an enterprise deal; focus on seizing a disproportionate share of a rapidly expanding AI services pie .
• Gross margin framework: Q4 GAAP GM 45.2%; management targets ~40% adjusted GM on net new opportunities, acknowledging program/customer mix variability .
• Investment posture: plan to reinvest primarily in people, tech, and product while maintaining discipline; objective to grow 2025 adjusted EBITDA vs 2024 .
• Liquidity: strong cash, undrawn facility, and anticipated FCF support reinvestment and capacity for opportunity capture .

Estimates Context

• Wall Street consensus (S&P Global) for EPS/revenue/EBITDA was unavailable during this session due to data access limits; therefore, external beat/miss versus consensus cannot be provided. We benchmarked results versus company guidance instead .
• If you’d like, we can re-pull S&P Global consensus and revisions once access is restored for a formal beat/miss table (and model the sensitivity of 2025 estimates to the new customer run-rate and margin targets).

Key Takeaways for Investors

• Demand momentum: Revenue growth inflected with a strong exit rate; 2025 guide at 40%+ is underpinned by won deals and visible near-in business .
• Diversification: Sequential +159% from seven other Big Tech customers reduces single-customer dependency risk over time; multiple pilots could translate into 7–8 figure opportunities .
• Margin quality: High-margin mix and Synodex optimization lifted adjusted GM; management’s ~40% adjusted GM target for net new deals provides a prudent base case .
• Productization edge: Trust & safety platform and pre-training data services open incremental revenue streams and deepen moat with enterprise and Big Tech .
• Balance sheet capacity: $46.9M cash and undrawn $30M facility give flexibility to reinvest for growth while targeting higher adjusted EBITDA in 2025 .
• Watch risks: Revenue concentration in DDS and largest customer; execution on pilot conversions; macro/capex cycles; tax rate normalization to 28%–31.5% in 2025 .
• Trading lens: Near-term catalysts include additional deal wins, pilots converting to scale, and confirmation of 2025 guide updates; any evidence of sustained margin discipline and enterprise traction should be stock-positive .