Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 01, 2020 | |
Cover | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | INNODATA INC | |
Entity Central Index Key | 0000903651 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Trading Symbol | INOD | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Common Stock, Shares Outstanding | 24,459,359 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 10,745 | $ 10,874 |
Accounts receivable, net of allowance for doubtful accounts of $773 and $750, respectively | 9,505 | 9,723 |
Prepaid expenses and other current assets | 3,676 | 3,418 |
Total current assets | 23,926 | 24,015 |
Property and equipment, net | 6,910 | 7,125 |
Right-of-use-asset | 6,530 | 7,005 |
Other assets | 2,442 | 2,110 |
Deferred income taxes | 2,083 | 1,906 |
Intangibles, net | 4,982 | 5,477 |
Goodwill | 2,003 | 2,108 |
Total assets | 48,876 | 49,746 |
Current liabilities: | ||
Accounts payable | 1,853 | 1,419 |
Accrued expenses | 3,451 | 3,340 |
Accrued salaries, wages and related benefits | 4,199 | 4,265 |
Income and other taxes | 4,529 | 4,183 |
Long-term obligations - current portion | 856 | 912 |
Operating lease liability - current portion | 922 | 1,107 |
Total current liabilities | 15,810 | 15,226 |
Deferred income taxes | 326 | 363 |
Long-term obligations, net of current portion | 4,579 | 4,534 |
Operating lease liability, net of current portion | 6,328 | 6,731 |
Non-controlling interests | (3,406) | (3,417) |
Commitments and contingencies | ||
STOCKHOLDERS' EQUITY: | ||
Serial preferred stock; 4,998,000 shares authorized, none outstanding | 0 | 0 |
Common stock, $.01 par value; 75,000,000 shares authorized; 27,643,000 shares issued and 24,459,000 outstanding at March 31, 2020 and December 31, 2019; | 275 | 275 |
Additional paid-in capital | 28,596 | 28,426 |
Retained earnings | 4,628 | 4,993 |
Accumulated other comprehensive loss | (1,795) | (920) |
Stockholders' Equity before Treasury Stock, Total | 31,704 | 32,774 |
Less: treasury stock, 3,184,000 shares at March 31, 2020 and December 31, 2019 at cost | (6,465) | (6,465) |
Total stockholders' equity | 25,239 | 26,309 |
Total liabilities and stockholders' equity | $ 48,876 | $ 49,746 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, net of allowance for doubtful accounts | $ 773 | $ 750 |
Series preferred stock, shares authorized | 4,998,000 | 4,998,000 |
Series preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 27,643,000 | 24,459,000 |
Common stock, shares outstanding | 27,643,000 | 24,459,000 |
Treasury stock, shares | 3,184,000 | 3,184,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||
Revenues | $ 14,530 | $ 13,694 |
Operating costs and expenses: | ||
Direct operating costs | 9,743 | 9,560 |
Selling and administrative expenses | 4,723 | 4,602 |
Interest expense, net | 13 | 11 |
Totals | 14,479 | 14,173 |
Income (loss) before provision for income taxes | 51 | (479) |
Provision for income taxes | 405 | (28) |
Consolidated net loss | (354) | (451) |
Income attributable to non-controlling interests | 11 | 1 |
Net loss attributable to Innodata Inc. and Subsidiaries | $ (365) | $ (452) |
Loss per share attributable to Innodata Inc. and Subsidiaries: | ||
Basic and diluted | $ (0.01) | $ (0.02) |
Weighted average shares outstanding: | ||
Basic and diluted | 24,401 | 25,927 |
Comprehensive loss: | ||
Consolidated net loss | $ (354) | $ (451) |
Pension liability adjustment, net of taxes | 14 | (36) |
Change in fair value of derivatives, net of taxes | (171) | 0 |
Foreign currency translation adjustment, net of taxes | (718) | 264 |
Other comprehensive loss | (875) | 228 |
Total comprehensive loss | (1,229) | (223) |
Comprehensive income attributed to non-controlling interests | 11 | 1 |
Comprehensive loss attributable to Innodata Inc. and Subsidiaries | $ (1,240) | $ (224) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Consolidated net loss | $ (354) | $ (451) |
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 643 | 809 |
Stock-based compensation | 170 | 129 |
Deferred income taxes | (71) | (734) |
Pension cost | 200 | 113 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (92) | 2,543 |
Prepaid expenses and other current assets | (439) | 474 |
Other assets | (336) | 75 |
Accounts payable and accrued expenses | 666 | 20 |
Accrued salaries, wages and related benefits | (53) | (1,047) |
Income and other taxes | 369 | 170 |
Net cash provided by operating activities | 703 | 2,101 |
Cash flows from investing activities: | ||
Capital expenditures | (578) | (485) |
Net cash used in investing activities | (578) | (485) |
Cash flows from financing activities: | ||
Payment of long-term obligations | (57) | (387) |
Net cash used in financing activities | (57) | (387) |
Effect of exchange rate changes on cash and cash equivalents | (197) | 63 |
Net increase (decrease) in cash and cash equivalents | (129) | 1,292 |
Cash and cash equivalents, beginning of period | 10,874 | 10,869 |
Cash and cash equivalents, end of period | 10,745 | 12,161 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | 0 | 339 |
Cash paid for operating leases | $ 504 | $ 501 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Retained earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balance at Dec. 31, 2018 | $ 275 | $ 27,579 | $ 7,349 | $ (15) | $ (4,622) | $ 30,566 |
Balance (in shares) at Dec. 31, 2018 | 25,877,000 | |||||
Balance (in shares) at Dec. 31, 2018 | 1,681,000 | |||||
Net loss attributable to Innodata Inc. and Subsidiaries | $ 0 | 0 | (452) | 0 | $ 0 | (452) |
Stock-based compensation | $ 0 | 129 | 0 | 0 | 0 | 129 |
Stock based compensation (in shares) | 75,000 | |||||
Pension liability adjustments, net of taxes | $ 0 | 0 | 0 | (36) | 0 | (36) |
Foreign currency translation adjustment | 0 | 0 | 0 | 264 | 0 | 264 |
Change in fair value of derivatives, net of taxes | 0 | |||||
Balance at Mar. 31, 2019 | $ 275 | 27,708 | 6,897 | 213 | $ (4,622) | 30,471 |
Balance (in shares) at Mar. 31, 2019 | 25,952,000 | |||||
Balance (in shares) at Mar. 31, 2019 | 1,681,000 | |||||
Balance at Dec. 31, 2019 | $ 275 | 28,426 | 4,993 | (920) | $ (6,465) | $ 26,309 |
Balance (in shares) at Dec. 31, 2019 | 27,643,000 | |||||
Balance (in shares) at Dec. 31, 2019 | 3,184,000 | 3,184,000 | ||||
Net loss attributable to Innodata Inc. and Subsidiaries | $ 0 | 0 | (365) | 0 | $ 0 | $ (365) |
Stock-based compensation | $ 0 | 170 | 0 | 0 | 0 | 170 |
Stock based compensation (in shares) | 0 | |||||
Pension liability adjustments, net of taxes | $ 0 | 0 | 0 | 14 | 0 | 14 |
Foreign currency translation adjustment | 0 | 0 | 0 | (718) | 0 | (718) |
Change in fair value of derivatives, net of taxes | 0 | 0 | 0 | (171) | 0 | (171) |
Balance at Mar. 31, 2020 | $ 275 | $ 28,596 | $ 4,628 | $ (1,795) | $ (6,465) | $ 25,239 |
Balance (in shares) at Mar. 31, 2020 | 27,643,000 | |||||
Balance (in shares) at Mar. 31, 2020 | 3,184,000 | 3,184,000 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Basis of Presentation - The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2020, the results of its operations and comprehensive loss for the three months ended March 31, 2020 and 2019, cash flows for the three months ended March 31, 2020 and 2019, and stockholders’ equity for the three months ended March 31, 2020 and 2019. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Certain information and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations of the SEC and, accordingly, these condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10‑K. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the condensed consolidated financial statements for the year December 31, 2019. Principles of Consolidation - The condensed consolidated financial statements include the accounts of Innodata Inc. and its wholly owned subsidiaries, and the Synodex and docGenix limited liability companies that are majority-owned by the Company. The non-controlling interests in the Synodex and docGenix limited liability companies are accounted for in accordance with Financial Accounting Standards Board (FASB) non-controlling interest guidance. All significant intercompany transactions and balances have been eliminated in consolidation. Use of Estimates - In preparing condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, valuation of stock-based compensation, litigation accruals and estimated accruals for various tax exposures. Revenue Recognition – The Company’s revenue is recognized when services are rendered to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services as per the agreement with the customer. In cases where there are agreements with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligation is distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation, if any, and then evaluates how the services are performed for the customer to determine the timing of revenue recognition. For the Digital Data Solutions (DDS) segment, revenue is recognized primarily based on the quantity delivered or resources utilized in the period in which services are performed and performance conditions are satisfied as per the agreement. Revenues for agreements billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee agreements, which are not significant to the overall revenues, are recognized based on the proportional performance method of accounting, as services are performed, or milestones are achieved. For the Synodex segment, revenue is recognized primarily based on the quantity delivered in the period in which services are performed and performance conditions are satisfied as per the agreement. A portion of our Synodex segment revenue is derived from licensing our functional software and providing access to our hosted software platform. Revenue from such services is recognized monthly when all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; access to the service is provided to the end user; and collection is probable. The Agility segment derives its revenue primarily from subscription arrangements and provision of enriched media analysis services. It also derives revenue as a reseller of corporate communication solutions. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user; all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; and collection is probable. Revenue from enriched media analysis services is recognized when the services are performed, and performance conditions are satisfied. Revenues from the reseller agreements are recognized at gross with our functioning as a principal due to our meeting the following criteria. We act as the primary obligor in the sales transaction; assume the credit risk; set the price; can select suppliers; and are involved in the execution of the services, including after sales service. Revenues include reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs. The Company considers U.S. GAAP criteria for determining whether to report revenue gross as a principal versus net as an agent. Factors considered include whether we are the primary obligor, have risks and rewards of ownership, and bear the risk that a customer may not pay for the services performed. If there are circumstances where the above criteria are not met and therefore, we are not the principal in providing services, amounts received from customers are presented net of payments in the condensed consolidated statements of operations and comprehensive loss. Contract acquisition cost, which is included in prepaid expenses and other current assets, for our Agility segment is amortized over the term of a subscription agreement that normally has a duration of 12 months or less. The Company reviews these costs on a periodic basis to determine the need to adjust the carrying values for pre-terminated contracts. Foreign Currency - The functional currency of the Company’s production operations located in the Philippines, India, Sri Lanka and Israel is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees and Israeli shekels are translated to U.S. dollars at rates using the average rates in effect on the transaction dates. The functional currency for the Company’s subsidiaries in Germany, the United Kingdom and Canada are the Euro, the Pound Sterling and the Canadian dollar, respectively. The financial statements of these subsidiaries are prepared in these respective currencies. Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in the condensed consolidated financial statements. Income, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of Accumulated other comprehensive loss in stockholders’ equity. Foreign exchange transaction gains or losses are included in Direct operating costs in the accompanying condensed consolidated statements of operations and comprehensive loss. To the extent that the currencies of the Company’s production facilities located in the Philippines, India, Sri Lanka and Israel fluctuate, the Company is subject to risks of changing costs of production after pricing is established for certain client projects. In addition, the Company is exposed to the risk of foreign currency fluctuation on the non-U.S. dollar denominated revenues, and on the monetary assets and liabilities held by its foreign subsidiaries that are denominated in local currencies. Income Taxes - Deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates, as well as any net operating loss or tax credit carryforwards expected to reduce taxes payable in future years. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax assets will not be realized. While the Company considers future taxable income in assessing the need for the valuation allowance, in the event that the Company determines that it would be able to realize the deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. Similarly, in the event that the Company determines that it would not be able to realize the deferred tax assets in the future considering future taxable income, an adjustment to the deferred tax assets would decrease income in the period such determination was made. Changes in the valuation allowance from period to period are included in the Company’s tax provision in the period of change. The Company indefinitely reinvests the foreign earnings in its foreign subsidiaries. Unremitted earnings of foreign subsidiaries have been included in the condensed consolidated financial statements without giving effect to the United States taxes that may be payable on distribution to the United States, because such earnings are not anticipated to be remitted to the United States. In assessing the realization of deferred tax assets, management considered whether it is more likely than not that all or some portion of the U.S. and Canadian deferred tax assets will not be realizable. As the expectation of future taxable income resulting from the U.S. and Canadian operations cannot be predicted with certainty, the Company maintains a valuation allowance against all the U.S. and Canadian deferred tax assets. The Company accounts for income taxes regarding uncertain tax positions, and recognizes interest and penalties related to uncertain tax positions in Income tax expense in the condensed consolidated statements of operations and comprehensive loss. Deferred Revenue - Deferred revenue represents payments received from clients in advance of providing services and amounts deferred if conditions for revenue recognition have not been met. Included in Accrued expenses on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 is deferred revenue amounting to $1.3 million and $1.1 million, respectively. Recent Accounting Pronouncements In August 2018, the FASB issued Accounting Standards Update (ASU) No. 2018‑14, “Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans” (ASU 2018‑14), that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and adds new disclosure requirements that the FASB considers pertinent. ASU 2018‑14 is effective for fiscal years ending after December 15, 2020 for public entities; early adoption is permitted. The Company is currently evaluating ASU 2018‑14 but does not expect it to have a material impact on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit a Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. The change will result in earlier recognition of credit losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022 for smaller reporting companies; early adoption is permitted. The Company is currently evaluating ASU 2016-13 but does not expect it to have a material impact on the Company’s condensed consolidated financial statements. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 2. Goodwill and Intangible Assets The Company has determined that recent adverse changes in macroeconomic trends as a consequence of the outbreak of COVID-19 constitute a triggering event under U.S. GAAP (Accounting Standards Codification (ASC) No. 350, Intangibles-Goodwill and Other and Accounting Standards Codification No. 360, Impairment and Disposal of Long-Lived Assets). The Company has completed its impairment analysis procedures on its reporting units as of March 31, 2020 and has determined that there was no impairment of long-lived assets, tangible nor intangible, in any reporting units. The changes in the carrying amount of goodwill for the three months ended March 31, 2020 and 2019 were as follows (in thousands): Balance as of January 1, 2019 $ 2,050 Foreign currency translation adjustment 39 Balance as of March 31, 2019 $ 2,089 Balance as of January 1, 2020 $ 2,108 Foreign currency translation adjustment (105) Balance as of March 31, 2020 $ 2,003 The fair value measurement of goodwill was classified within Level 3 of the fair value hierarchy because the Company used the income approach, which utilizes significant inputs that are unobservable in the market. The Company believes it made reasonable estimates and assumptions to calculate the fair value of the reporting unit as of the impairment test measurement date. Information regarding the Company’s acquisition-related intangible assets was as follows (in thousands): Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Gross carrying amounts: Balance as of January 1, 2020 $ 3,108 $ 2,177 $ 871 $ 44 $ 3,605 $ 9,805 Foreign currency translation (206) (184) (29) (3) (95) (517) Balance as of March 31, 2020 $ 2,902 $ 1,993 $ 842 $ 41 $ 3,510 $ 9,288 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Gross carrying amounts: Balance as of January 1, 2019 $ 2,999 $ 2,081 $ 855 $ 42 $ 3,546 $ 9,523 Foreign currency translation 61 47 10 1 59 178 Balance as of March 31, 2019 $ 3,060 $ 2,128 $ 865 $ 43 $ 3,605 $ 9,701 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Accumulated amortization: Balance as of January 1, 2020 $ 1,493 $ 983 $ 567 $ 24 $ 1,262 $ 4,329 Amortization expense 78 45 14 1 90 228 Foreign currency translation (111) (87) (15) (2) (36) (251) Balance as of March 31, 2020 $ 1,460 $ 941 $ 566 $ 23 $ 1,316 $ 4,306 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Accumulated amortization: Balance as of January 1, 2019 $ 1,137 $ 766 $ 440 $ 19 $ 886 $ 3,248 Amortization expense 77 45 30 1 89 242 Foreign currency translation 24 16 4 — 16 60 Balance as of March 31, 2019 $ 1,238 $ 827 $ 474 $ 20 $ 991 $ 3,550 Amortization expense relating to acquisition-related intangible assets was $0.2 million for each of the three months ended March 31, 2020 and 2019. As of the date hereof, estimated amortization expense for intangible assets after March 31, 2020 is as follows (in thousands): Year Amortization 2020 $ 648 2021 864 2022 864 2023 864 2024 772 Thereafter 970 $ 4,982 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | 3. Income Taxes The Company recorded a provision for income taxes of $0.4 million and ($28,000) for the three months ended March 31, 2020 and 2019, respectively. Taxes primarily consist of a provision for foreign taxes recorded by the Company’s foreign subsidiaries in accordance with local tax regulations. Effective income tax rates are disproportionate due to the losses incurred by the Company’s U.S. entities and Canadian subsidiaries and a valuation allowance recorded on deferred taxes of these entities and tax effects of foreign operations, including foreign exchange gains and losses. The reconciliations of the U.S. statutory rate with the Company’s effective tax rate for the three-month periods ended March 31, 2020 and 2019 are summarized in the table below: For the three months ended March 31, 2020 2019 Federal income tax expense at statutory rate 21.0 % 21.0 % Effect of: Tax effects of foreign operations 597.8 (34.0) Foreign operations permanent difference - foreign exchange gains and losses 355.3 104.2 Increase in unrecognized tax benefits (ASC 740) 165.1 (36.8) State income tax net of federal benefit 39.8 — Withholding tax 22.9 — Return to provision true up 1.2 (28.0) Foreign rate differential (85.5) (8.1) Change in valuation allowance (193.3) (7.9) Other (130.2) (4.6) Effective tax rate 794.1 % 5.8 % As of March 31, 2020, the Company performed a calculation of the Global Intangible Low-Taxed Income (GILTI) provisions and concluded that it continues to have no impact on account of the net losses of our foreign subsidiaries. The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2020 (in thousands): Unrecognized tax benefits Balance - January 1, 2020 $ 2,957 Increase in tax position 75 Interest accrual 45 Foreign currency remeasurement (149) Balance -March 31, 2020 $ 2,928 The Company had unrecognized tax benefits of approximately $2.9 million and $3.0 million as of March 31, 2020 and December 31, 2019, respectively. The portion of unrecognized tax benefits relating to an increase in tax positions was approximately $0.1 million while the portion of unrecognized tax benefits relating to interest and penalties was approximately $45,000 for the three months ended March 31, 2020. The Company expects that unrecognized tax benefits as of March 31, 2020 and December 31, 2019, if recognized, would have a material impact on the Company’s effective tax rate. The Company is subject to Federal income tax, as well as income tax in various states and foreign jurisdictions. The Company has open periods for U.S. Federal and state taxes from 2016 through 2019. Various foreign subsidiaries currently have open tax years from 2003 through 2019. Tax Assessments In September 2015, the Company’s Indian subsidiary was subject to an inquiry by the Service Tax Department in India regarding the classification of services provided by this subsidiary, asserting that the services provided by this subsidiary fall under the category of online information and database access or retrieval services (OID Services), and not under the category of business support services (BS Services) that are exempt from service tax as historically indicated in the subsidiary’s service tax filings. The Company disagrees with the Service Tax Department’s position. In November 2019, the Commissioner of Central Tax, GST & Central Excise issued an order confirming the Service Tax Department's position. The Company is contesting this order in an appeal to the Customs, Excise and Service Tax Appellate Tribunal. In the event the Service Tax Department is ultimately successful in proving that the services fall under the category of OID Services, the revenues earned by the Company’s Indian subsidiary for the period July 2012 through November 2016 would be subject to a service tax of between 12.36% and 15%, and this subsidiary may also be liable for interest and penalties. The revenue of our Indian subsidiary during this period was approximately $66.0 million. In accordance with new rules promulgated by the Service Tax Department, as of December 1, 2016 service tax is no longer applicable to OID or BS Services. Based on the assessment of the Company’s counsel, the Company has not recorded any tax liability for this case. In a separate action relating to service tax refunds, in October 2016, the Company’s Indian subsidiary received notices from the Indian Service Tax Department in India seeking to reverse service tax refunds of approximately $160,000 previously granted to our Indian subsidiary for three quarters in 2014, asserting that the services provided by this subsidiary fall under the category of OID Services and not BS Services. The appeal was determined in favor of the Service Tax Department. The Company disagrees with the basis of this decision and is contesting it. The Company expects delays in its Indian subsidiary receiving further service tax refunds until this matter is adjudicated with finality, and currently has service tax credits of approximately $1.0 million recorded as a receivable. Based on the assessment of the Company’s counsel, the Company has not recorded any tax liability for this case. Substantial recovery against the Company in the above referenced 2015 Service Tax Department case could have a material adverse impact on the Company, and unfavorable rulings or recoveries in other tax proceedings could have a material adverse impact on the consolidated operating results of the period in which the rulings or recovery occurs. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 4. Commitments and Contingencies COVID-19 Pandemic - The novel coronavirus disease 2019 (“COVID-19”), which the World Health Organization declared as a pandemic on March 11, 2020, continues to spread throughout the world. COVID-19 has created significant global economic downturn, disrupted global trade and supply chains, adversely impacted many industries, caused federal and regional governments to impose substantial restrictions on the operations of non-essential businesses and contributed to significant declines and volatility in financial markets. The rapid development and fluidity of this situation precludes any prediction as to the ultimate impact of COVID-19 on the Company’s performance and financial results. The situation surrounding COVID-19 crisis remains fluid and the extent and duration of its impact to the economy remains unclear. For this reason, the company cannot reasonably estimate with any degree of certainty the future impact to its results of operations and financial condition. In late March, as a result of the COVID-19 crisis, the Company began to experience reduced demand for its services from existing and prospective customers. The potential for a material impact on the Company’s results of operations and financial position increases the longer the virus affects the level of economic activity in the United States and globally. The Company believes it has existing cash and cash equivalents which provide sufficient sources of liquidity to satisfy the Company’s financial needs for the next 12 months from the date of this Report while sustaining the current level of reduced demand for our services for a period of time. In the event the Company experiences a significant or prolonged reduction in revenues, the likelihood of which is uncertain, it would seek to manage its liquidity by reducing capital expenditures, deferring investing activities, and reducing costs as it would likely have no other source of liquidity to support ongoing operations in a manner that is not significantly detrimental to the business. Litigation – In 2008, a judgment was rendered in the Philippines against a Philippine subsidiary of the Company that is no longer active and purportedly also against Innodata Inc., in favor of certain former employees of the Philippine subsidiary. The potential payment amount aggregates to approximately $6.4 million, plus legal interest that accrued at 12% per annum from August 13, 2008 to June 30, 2013, and thereafter accrued and continues to accrue at 6% per annum. The potential payment amount as expressed in U.S. dollars varies with the Philippine peso to U.S. dollar exchange rate. In December 2017, a group of 97 of the former employees of the Philippine subsidiary indicated that they proposed to record the judgment as to themselves in New Jersey. In January 2018, in response to an action initiated by Innodata Inc., the United States District Court for the District of New Jersey (USDC) entered a preliminary injunction that enjoins these former employees from pursuing or seeking recognition or enforcement of the judgment against Innodata Inc. in the United States during the pendency of the action and until further order of the USDC. In June 2018, the USDC entered a consent order administratively closing the action subject to return of the action to the active docket upon the written request of Innodata Inc. or the former employees, with the USDC retaining jurisdiction over the matter and the preliminary injunction remaining in full force and effect. The Company is also subject to various other legal proceedings and claims that have arisen in the ordinary course of business. While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s consolidated financial position or overall trends in consolidated results of operations, litigation is subject to inherent uncertainties. Substantial recovery against the Company in the above-referenced Philippine action could have a material adverse impact on the Company, and unfavorable rulings or recoveries in the other proceedings could have a material adverse impact on the consolidated operating results of the Company. In addition, the Company’s estimate of the potential impact on the Company’s consolidated financial position or overall consolidated results of operations for the above referenced legal proceedings could change in the future. The Company’s legal accruals related to legal proceedings and claims are based on the Company's determination of whether or not a loss is probable. The Company reviews outstanding proceedings and claims with external counsel to assess probability and estimates of loss. The accruals are adjusted if necessary. While the Company intends to defend these matters vigorously, adverse outcomes that it estimates could reach approximately $300,000 in the aggregate beyond recorded amounts are reasonably possible. If circumstances change, the Company may be required to record adjustments that could be material to its reported consolidated financial condition and results of operations. |
Stock Options
Stock Options | 3 Months Ended |
Mar. 31, 2020 | |
Stock Options | |
Stock Options | 5. Stock Options On June 7, 2016, stockholders of the Company approved amendments to the Innodata Inc. 2013 Stock Plan. The Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016, is referred to herein as the “Plan.” The number of shares of common stock of Innodata Inc. that may be delivered, purchased or used for reference purposes (with respect to stock appreciation rights or stock units) for awards granted under the Plan after June 7, 2016 is 5,858,892 (the Share Reserve). Shares subject to an option or stock appreciation right granted under the Plan after June 7, 2016 count against the Share Reserve as one share for every share granted, and shares subject to any other type of award granted under the Plan after June 7, 2016 count against the Share Reserve as two shares for every share granted. Any award, or portion of an award, under the Plan or under the Company’s 2009 Stock Plan (as amended and restated (the Prior Plan)) that expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without delivery of shares or other consideration will be added back to the Share Reserve as one share for each such share that was subject to an option or stock appreciation right granted under the Plan or the Prior Plan, and two shares for each such share that was subject to an award other than an option or stock appreciation right granted under the Plan or the Prior Plan. If any shares are withheld, tendered or exchanged by a participant in the Plan as full or partial payment to Innodata of the exercise price under an option under the Plan or the Prior Plan or in satisfaction of a participant’s tax withholding obligations with respect to any award under the Plan or the Prior Plan, there will be added back to the Share Reserve one share for each such share that was withheld, tendered or exchanged in respect of an option or stock appreciation right granted under the Plan or the Prior Plan, and two shares for each such share that was withheld, tendered or exchanged in respect of an award other than an option or stock appreciation right granted under the Plan or the Prior Plan. A summary of stock option activity under the Plan as of March 31, 2020, and changes during the three months then ended, are presented below: Weighted- Weighted - Average Average Remaining Aggregate Number of Exercise Contractual Term Intrinsic Options Price (years) Value Outstanding at January 1, 2020 6,833,303 $ 1.86 Granted — Exercised — Forfeited/Expired (544,303) 3.39 Outstanding at March 31, 2020 6,289,000 $ 1.73 7.19 $ - Exercisable at March 31, 2020 4,108,622 $ 2.01 6.29 $ - Vested and Expected to Vest at March 31, 2020 6,289,000 $ 1.73 $ - The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average fair value of the options granted, and weighted-average assumptions were as follows: For the three months ended March 31, 2020 2019 Weighted average fair value of options granted $ — $ 0.64 Risk-free interest rate — 2.55 % Expected term (years) — 6 Expected volatility factor — 45 % Expected dividends — None A summary of restricted shares under the Company’s Plan as of March 31, 2020 are presented below: Weighted-Average Grant Date Fair Number of Shares Value Granted 75,000 $ 1.38 Vested (25,000) — Forfeited/Expired — — Unvested at March 31, 2020 50,000 $ 1.38 The compensation cost related to non-vested stock options and restricted stock awards not yet recognized as of March 31, 2020 totaled approximately $1.2 million. The weighted-average period over which these costs will be recognized is twenty-three months. The stock-based compensation expense related to the Company’s various stock awards was allocated as follows (in thousands): For the three months ended March 31, 2020 2019 Direct operating costs $ 40 $ 18 Selling and administrative expenses 130 111 Total stock-based compensation $ 170 $ 129 |
Operating Leases
Operating Leases | 3 Months Ended |
Mar. 31, 2020 | |
Operating Leases | |
Operating Leases | 6. Operating Leases The Company has various operating lease agreements for its offices and service delivery centers. The Company has determined that the risks and benefits related to the leased properties are retained by the lessors. Accordingly, these are accounted for as operating leases. These lease agreements are for terms ranging from two to eleven years and, in most cases, provide for rental escalations ranging from 1.75% to 10%. Most of these agreements are renewable at the mutual consent of the parties in the contract. The Company adopted ASU 2016-02, "Leases (Topic 842) ," beginning January 1, 2019 and applied the practical expedients consistently for all of its leases. The table below summarizes the amounts recognized in the financial statements related to operating leases for the periods presented (in thousands): For the three months ended March 31, 2020 2019 Rent expense for long-term operating leases $ 443 $ 415 Rent expense for short-term leases 61 86 Total rent expense $ 504 $ 501 The following table presents the maturity profile of the Company’s operating lease liabilities based on the contractual undiscounted payments with a reconciliation of these amounts to the remaining net present value of the operating lease liability reported in the condensed consolidated balance sheet as of March 31, 2020 (in thousands): Year Amount 2020 $ 1,188 2021 1,232 2022 1,182 2023 1,031 2024 1,048 2025 and thereafter 4,585 Total lease payments 10,266 Less: Interest (3,016) Net present value of lease liabilities $ 7,250 Current portion $ 922 Long-term portion 6,328 Total $ 7,250 The weighted-average remaining lease terms and discount rates for all of our operating leases as of March 31, 2020 were as follows: Weighted-average lease term remaining 68 months Weighted-average discount rate 8.92 % |
Long-term Obligations
Long-term Obligations | 3 Months Ended |
Mar. 31, 2020 | |
Long-term Obligations | |
Long-term Obligations | 7. Long-term Obligations Total long-term obligations of the Company as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands): March 31, December 31, 2020 2019 Pension obligations - accrued pension liability $ 4,670 $ 4,611 Settlement agreement (1) 652 708 Capital lease obligations 113 127 5,435 5,446 Less: Current portion of long-term obligations 856 912 Totals $ 4,579 $ 4,534 (1) Represents payment to be made pursuant to a settlement agreement entered into in December 2018 between a subsidiary of the Company and 19 former employees of such subsidiary. The balance is payable in monthly installments through March 2023. |
Comprehensive Loss
Comprehensive Loss | 3 Months Ended |
Mar. 31, 2020 | |
Comprehensive Loss | |
Comprehensive Loss | 8. Comprehensive Loss Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, consists of pension liability adjustments, net of taxes, foreign currency translation adjustments, net of taxes and changes in fair value of derivatives, net of taxes. The components of Accumulated other comprehensive loss as of March 31, 2020, and reclassifications out of Accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019, were as follows (net of tax) (in thousands): Foreign Accumulated Pension Fair Value Currency Other Liability of Translation Comprehensive Adjustment Derivatives Adjustment Loss Balance at January 1, 2020 $ (53) $ 33 $ (900) $ (920) Other comprehensive loss before reclassifications, net of taxes — (166) (718) (884) Total other comprehensive loss before reclassifications, net of taxes (53) (133) (1,618) (1,804) Net amount reclassified to earnings 14 (5) - 9 Balance at March 31, 2020 $ (39) $ (138) $ (1,618) $ (1,795) Foreign Accumulated Pension Fair Value Currency Other Liability of Translation Comprehensive Adjustment Derivatives Adjustment Loss Balance at January 1, 2019 $ 1,451 $ — $ (1,466) $ (15) Other comprehensive income before reclassifications, net of taxes — — 264 264 Total other comprehensive income (loss) before reclassifications, net of taxes 1,451 — (1,202) 249 Net amount reclassified to earnings (36) — — (36) Balance at March 31, 2019 $ 1,415 $ — $ (1,202) $ 213 All reclassifications out of Accumulated other comprehensive loss had an impact on Direct operating costs in the condensed consolidated statements of operations and comprehensive loss. |
Segment Reporting and Concentra
Segment Reporting and Concentrations | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting and Concentrations | |
Segment Reporting and Concentrations | 9. Segment Reporting and Concentrations The Company’s operations are classified in three reporting segments: Digital Data Solutions (DDS), Synodex and Agility. The DDS segment provides a range of solutions and platforms for solving complex data challenges that companies face when they seek to obtain the benefits of artificial intelligence (AI) systems and analytics platforms. These include data annotation, data transformation, data curation and intelligent automation. The DDS segment also provides a variety of services for clients in the information industry that relate to content operations and product development. The Synodex segment provides an intelligent data platform that transforms medical records into useable digital data organized in accordance with our proprietary data models or client data models. The Agility segment provides an intelligent data platform that 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 channels (print, web, radio and TV) and social media channels. A significant portion of the Company’s revenues is generated from its facilities in the Philippines, India, Sri Lanka, Canada, Germany, the United Kingdom and Israel. Revenues from external clients and segment operating profit (loss), and other reportable segment information were as follows (in thousands): For the three months ended March 31, 2020 2019 Revenues: DDS $ 10,409 $ 10,177 Synodex 1,282 1,024 Agility 2,839 2,493 Total Consolidated $ 14,530 $ 13,694 Income (loss) before provision for income taxes (1) : DDS $ 129 $ 74 Synodex 196 119 Agility (274) (672) Total Consolidated $ 51 $ (479) Income (loss) before provision for income taxes (2) : DDS $ 59 $ 12 Synodex 241 159 Agility (249) (650) Total Consolidated $ 51 $ (479) March 31, 2020 December 31 , 2019 Total assets: DDS $ 21,537 $ 23,196 Synodex 598 675 Agility 26,741 25,875 Total Consolidated $ 48,876 $ 49,746 March 31, 2020 December 31, 2019 Goodwill: Agility $ 2,003 $ 2,108 Total Consolidated $ 2,003 $ 2,108 (1) Before elimination of any inter-segment profits (2) After elimination of any inter-segment profits The following table summarizes revenues by geographic region (determined and based upon customer’s domicile) (in thousands): For the three months ended March 31, 2020 2019 United States $ 6,690 $ 6,531 United Kingdom 2,771 2,318 The Netherlands 1,640 1,722 Canada 1,545 1,484 Others - principally Europe 1,884 1,639 Totals $ 14,530 $ 13,694 Long-lived assets of the Company as of March 31, 2020 and December 31, 2019, respectively, by geographic region, were comprised of the following (in thousands): March 31, December 31, 2020 2019 United States $ 4,455 $ 4,591 Foreign countries: Canada 8,216 8,876 United Kingdom 1,738 1,907 Philippines 4,998 5,135 India 381 508 Sri Lanka 632 678 Israel 4 19 Germany 1 1 Total foreign 15,970 17,124 Totals $ 20,425 $ 21,715 Long-lived assets include the unamortized balance of right-of-use assets amounting to $6.5 million and $7.0 million as of March 31, 2020 and December 31, 2019, respectively. One client in the DDS segment generated approximately 14% of the Company’s total revenues for the three months ended March 31, 2020 and 16% of the Company’s total revenues for the three months ended March 31, 2019. Another client generated less than 10% of the Company’s total revenues for the three months ended March 31, 2020 and 10% of the Company’s total revenues for the three months ended March 31, 2019. No other client accounted for 10% or more of total revenues during these periods. Further, revenues from non-U.S. clients accounted for 54% and 52% of the Company’s total revenues for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, approximately 59% of the Company's accounts receivable was from foreign (principally European) clients and 28% of the Company’s accounts receivable was due from two clients. As of December 31, 2019, approximately 60% of the Company's accounts receivable was from foreign (principally European) clients and 44% of the Company’s accounts receivable was due from three clients. |
Loss per Share
Loss per Share | 3 Months Ended |
Mar. 31, 2020 | |
Loss per Share | |
Loss per Share | 10. Loss Per Share For the three months ended March 31, 2020 2019 Net loss attributable to Innodata Inc. and Subsidiaries $ (365) $ (452) Weighted average common shares outstanding 24,401 25,927 Dilutive effect of outstanding options — — Adjusted for dilutive computation 24,401 25,927 Basic loss per share is computed using the weighted-average number of common shares outstanding during the year. Diluted loss per share is computed by considering the impact of the potential issuance of common shares, using the treasury stock method, on the weighted average number of shares outstanding. For those securities that are not convertible into a class of common stock, the two-class method of computing loss per share is used. Options to purchase 6.3 million shares and 5.0 million shares of common stock for the three months ended March 31, 2020 and 2019, respectively, were outstanding but not included in the computation of diluted loss per share because the exercise price of the options was greater than the average market price of the common shares and therefore the effect would have been anti-dilutive. |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2020 | |
Derivatives | |
Derivatives | 11. Derivatives The Company conducts a large portion of its operations in international markets that subject it to foreign currency fluctuations. The most significant foreign currency exposures occur when revenue and associated accounts receivable are collected in one currency and expenses to generate that revenue are incurred in another currency. The Company’s primary exchange rate exposure relates to payroll, other payroll costs and operating expenses in the Philippines, India, Sri Lanka and Israel. In addition, although most of the Company’s revenues are denominated in U.S. dollars, a significant portion of the total revenues is denominated in Canadian dollars, Pound Sterling and Euros. To manage its exposure to fluctuations in foreign currency exchange rates, the Company enters into foreign currency forward contracts, authorized under Company policies. The Company utilizes non-deliverable forward contracts expiring within six months to reduce its foreign currency risk. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking hedging transactions. The Company does not hold or issue derivatives for trading purposes. All derivatives are recognized at their fair value and classified based on the instrument’s maturity date. The total notional amount for outstanding derivatives as of March 31, 2020 and December 31, 2019 was $3.2 million and $4.3 million, respectively, which was comprised of cash flow hedges denominated in U.S. dollars. The following table presents the fair value of derivative instruments included within the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands): Balance Sheet Location Fair Value 2020 2019 Derivatives designated as hedging instruments: Foreign currency forward contracts Accrued expenses $ 138 $ — Foreign currency forward contracts Prepaid expenses and other current assets $ — $ 33 The effects of foreign currency forward contracts designated as cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, respectively, were as follows (in thousands): For the three months ended March 31, 2020 2019 Net gain (loss) recognized in OCI (1) $ (166) $ — Net (gain) loss reclassified from accumulated OCI into income (2) $ (5) $ — Net gain recognized in income (3) $ — $ — (1) Net change in fair value of the effective portion classified into other comprehensive income ("OCI") (2) Effective portion classified within direct operating costs (3) There were no ineffective portions for the period presented. |
Subsequent Event
Subsequent Event | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Event | |
Subsequent Event | 12 . Subsequent Event On May 4, 2020, the Company received loan proceeds of $579,700 under the Paycheck Protection Program (PPP) established as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The unforgiven portion of the loan is payable over two years at an interest rate of 1% per year, with a deferral of payments for the first six months. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation - The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2020, the results of its operations and comprehensive loss for the three months ended March 31, 2020 and 2019, cash flows for the three months ended March 31, 2020 and 2019, and stockholders’ equity for the three months ended March 31, 2020 and 2019. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Certain information and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations of the SEC and, accordingly, these condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10‑K. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the condensed consolidated financial statements for the year December 31, 2019. |
Principles of Consolidation | Principles of Consolidation - The condensed consolidated financial statements include the accounts of Innodata Inc. and its wholly owned subsidiaries, and the Synodex and docGenix limited liability companies that are majority-owned by the Company. The non-controlling interests in the Synodex and docGenix limited liability companies are accounted for in accordance with Financial Accounting Standards Board (FASB) non-controlling interest guidance. All significant intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates - In preparing condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, valuation of stock-based compensation, litigation accruals and estimated accruals for various tax exposures. |
Revenue Recognition | Revenue Recognition – The Company’s revenue is recognized when services are rendered to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services as per the agreement with the customer. In cases where there are agreements with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligation is distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation, if any, and then evaluates how the services are performed for the customer to determine the timing of revenue recognition. For the Digital Data Solutions (DDS) segment, revenue is recognized primarily based on the quantity delivered or resources utilized in the period in which services are performed and performance conditions are satisfied as per the agreement. Revenues for agreements billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee agreements, which are not significant to the overall revenues, are recognized based on the proportional performance method of accounting, as services are performed, or milestones are achieved. For the Synodex segment, revenue is recognized primarily based on the quantity delivered in the period in which services are performed and performance conditions are satisfied as per the agreement. A portion of our Synodex segment revenue is derived from licensing our functional software and providing access to our hosted software platform. Revenue from such services is recognized monthly when all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; access to the service is provided to the end user; and collection is probable. The Agility segment derives its revenue primarily from subscription arrangements and provision of enriched media analysis services. It also derives revenue as a reseller of corporate communication solutions. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user; all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; and collection is probable. Revenue from enriched media analysis services is recognized when the services are performed, and performance conditions are satisfied. Revenues from the reseller agreements are recognized at gross with our functioning as a principal due to our meeting the following criteria. We act as the primary obligor in the sales transaction; assume the credit risk; set the price; can select suppliers; and are involved in the execution of the services, including after sales service. Revenues include reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs. The Company considers U.S. GAAP criteria for determining whether to report revenue gross as a principal versus net as an agent. Factors considered include whether we are the primary obligor, have risks and rewards of ownership, and bear the risk that a customer may not pay for the services performed. If there are circumstances where the above criteria are not met and therefore, we are not the principal in providing services, amounts received from customers are presented net of payments in the condensed consolidated statements of operations and comprehensive loss. Contract acquisition cost, which is included in prepaid expenses and other current assets, for our Agility segment is amortized over the term of a subscription agreement that normally has a duration of 12 months or less. The Company reviews these costs on a periodic basis to determine the need to adjust the carrying values for pre-terminated contracts. |
Foreign Currency | Foreign Currency - The functional currency of the Company’s production operations located in the Philippines, India, Sri Lanka and Israel is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees and Israeli shekels are translated to U.S. dollars at rates using the average rates in effect on the transaction dates. The functional currency for the Company’s subsidiaries in Germany, the United Kingdom and Canada are the Euro, the Pound Sterling and the Canadian dollar, respectively. The financial statements of these subsidiaries are prepared in these respective currencies. Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in the condensed consolidated financial statements. Income, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of Accumulated other comprehensive loss in stockholders’ equity. Foreign exchange transaction gains or losses are included in Direct operating costs in the accompanying condensed consolidated statements of operations and comprehensive loss. To the extent that the currencies of the Company’s production facilities located in the Philippines, India, Sri Lanka and Israel fluctuate, the Company is subject to risks of changing costs of production after pricing is established for certain client projects. In addition, the Company is exposed to the risk of foreign currency fluctuation on the non-U.S. dollar denominated revenues, and on the monetary assets and liabilities held by its foreign subsidiaries that are denominated in local currencies. |
Income Taxes | Income Taxes - Deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates, as well as any net operating loss or tax credit carryforwards expected to reduce taxes payable in future years. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax assets will not be realized. While the Company considers future taxable income in assessing the need for the valuation allowance, in the event that the Company determines that it would be able to realize the deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. Similarly, in the event that the Company determines that it would not be able to realize the deferred tax assets in the future considering future taxable income, an adjustment to the deferred tax assets would decrease income in the period such determination was made. Changes in the valuation allowance from period to period are included in the Company’s tax provision in the period of change. The Company indefinitely reinvests the foreign earnings in its foreign subsidiaries. Unremitted earnings of foreign subsidiaries have been included in the condensed consolidated financial statements without giving effect to the United States taxes that may be payable on distribution to the United States, because such earnings are not anticipated to be remitted to the United States. In assessing the realization of deferred tax assets, management considered whether it is more likely than not that all or some portion of the U.S. and Canadian deferred tax assets will not be realizable. As the expectation of future taxable income resulting from the U.S. and Canadian operations cannot be predicted with certainty, the Company maintains a valuation allowance against all the U.S. and Canadian deferred tax assets. The Company accounts for income taxes regarding uncertain tax positions, and recognizes interest and penalties related to uncertain tax positions in Income tax expense in the condensed consolidated statements of operations and comprehensive loss. |
Deferred Revenue | Deferred Revenue - Deferred revenue represents payments received from clients in advance of providing services and amounts deferred if conditions for revenue recognition have not been met. Included in Accrued expenses on the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 is deferred revenue amounting to $1.3 million and $1.1 million, respectively. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the FASB issued Accounting Standards Update (ASU) No. 2018‑14, “Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans” (ASU 2018‑14), that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and adds new disclosure requirements that the FASB considers pertinent. ASU 2018‑14 is effective for fiscal years ending after December 15, 2020 for public entities; early adoption is permitted. The Company is currently evaluating ASU 2018‑14 but does not expect it to have a material impact on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit a Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. The change will result in earlier recognition of credit losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022 for smaller reporting companies; early adoption is permitted. The Company is currently evaluating ASU 2016-13 but does not expect it to have a material impact on the Company’s condensed consolidated financial statements. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets | |
Schedule of Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the three months ended March 31, 2020 and 2019 were as follows (in thousands): Balance as of January 1, 2019 $ 2,050 Foreign currency translation adjustment 39 Balance as of March 31, 2019 $ 2,089 Balance as of January 1, 2020 $ 2,108 Foreign currency translation adjustment (105) Balance as of March 31, 2020 $ 2,003 |
Schedule of company's acquisition-related intangible assets | Information regarding the Company’s acquisition-related intangible assets was as follows (in thousands): Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Gross carrying amounts: Balance as of January 1, 2020 $ 3,108 $ 2,177 $ 871 $ 44 $ 3,605 $ 9,805 Foreign currency translation (206) (184) (29) (3) (95) (517) Balance as of March 31, 2020 $ 2,902 $ 1,993 $ 842 $ 41 $ 3,510 $ 9,288 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Gross carrying amounts: Balance as of January 1, 2019 $ 2,999 $ 2,081 $ 855 $ 42 $ 3,546 $ 9,523 Foreign currency translation 61 47 10 1 59 178 Balance as of March 31, 2019 $ 3,060 $ 2,128 $ 865 $ 43 $ 3,605 $ 9,701 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Accumulated amortization: Balance as of January 1, 2020 $ 1,493 $ 983 $ 567 $ 24 $ 1,262 $ 4,329 Amortization expense 78 45 14 1 90 228 Foreign currency translation (111) (87) (15) (2) (36) (251) Balance as of March 31, 2020 $ 1,460 $ 941 $ 566 $ 23 $ 1,316 $ 4,306 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Accumulated amortization: Balance as of January 1, 2019 $ 1,137 $ 766 $ 440 $ 19 $ 886 $ 3,248 Amortization expense 77 45 30 1 89 242 Foreign currency translation 24 16 4 — 16 60 Balance as of March 31, 2019 $ 1,238 $ 827 $ 474 $ 20 $ 991 $ 3,550 |
Schedule of estimated amortization expense for intangible assets | As of the date hereof, estimated amortization expense for intangible assets after March 31, 2020 is as follows (in thousands): Year Amortization 2020 $ 648 2021 864 2022 864 2023 864 2024 772 Thereafter 970 $ 4,982 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Schedule of Effective Income Tax Rate Reconciliation | The reconciliations of the U.S. statutory rate with the Company’s effective tax rate for the three-month periods ended March 31, 2020 and 2019 are summarized in the table below: For the three months ended March 31, 2020 2019 Federal income tax expense at statutory rate 21.0 % 21.0 % Effect of: Tax effects of foreign operations 597.8 (34.0) Foreign operations permanent difference - foreign exchange gains and losses 355.3 104.2 Increase in unrecognized tax benefits (ASC 740) 165.1 (36.8) State income tax net of federal benefit 39.8 — Withholding tax 22.9 — Return to provision true up 1.2 (28.0) Foreign rate differential (85.5) (8.1) Change in valuation allowance (193.3) (7.9) Other (130.2) (4.6) Effective tax rate 794.1 % 5.8 % |
Schedule Of unrecognized Tax Benefits | The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2020 (in thousands): Unrecognized tax benefits Balance - January 1, 2020 $ 2,957 Increase in tax position 75 Interest accrual 45 Foreign currency remeasurement (149) Balance -March 31, 2020 $ 2,928 |
Stock Options (Tables)
Stock Options (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stock Options | |
Schedule of Stock Option Activity | A summary of stock option activity under the Plan as of March 31, 2020, and changes during the three months then ended, are presented below: Weighted- Weighted - Average Average Remaining Aggregate Number of Exercise Contractual Term Intrinsic Options Price (years) Value Outstanding at January 1, 2020 6,833,303 $ 1.86 Granted — Exercised — Forfeited/Expired (544,303) 3.39 Outstanding at March 31, 2020 6,289,000 $ 1.73 7.19 $ - Exercisable at March 31, 2020 4,108,622 $ 2.01 6.29 $ - Vested and Expected to Vest at March 31, 2020 6,289,000 $ 1.73 $ - |
Schedule of weighted average assumptions | The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average fair value of the options granted, and weighted-average assumptions were as follows: For the three months ended March 31, 2020 2019 Weighted average fair value of options granted $ — $ 0.64 Risk-free interest rate — 2.55 % Expected term (years) — 6 Expected volatility factor — 45 % Expected dividends — None |
Summary of restricted shares under the Company's Plan | A summary of restricted shares under the Company’s Plan as of March 31, 2020 are presented below: Weighted-Average Grant Date Fair Number of Shares Value Granted 75,000 $ 1.38 Vested (25,000) — Forfeited/Expired — — Unvested at March 31, 2020 50,000 $ 1.38 |
Schedule of Stock-Based Compensation Expense | The stock-based compensation expense related to the Company’s various stock awards was allocated as follows (in thousands): For the three months ended March 31, 2020 2019 Direct operating costs $ 40 $ 18 Selling and administrative expenses 130 111 Total stock-based compensation $ 170 $ 129 |
Operating Leases (Tables)
Operating Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Operating Leases | |
Schedule of Operating Lease Expense Recognized in Financial Statements | The table below summarizes the amounts recognized in the financial statements related to operating leases for the periods presented (in thousands): For the three months ended March 31, 2020 2019 Rent expense for long-term operating leases $ 443 $ 415 Rent expense for short-term leases 61 86 Total rent expense $ 504 $ 501 |
Schedule of Net Present Value of Operating Lease Liability | The following table presents the maturity profile of the Company’s operating lease liabilities based on the contractual undiscounted payments with a reconciliation of these amounts to the remaining net present value of the operating lease liability reported in the condensed consolidated balance sheet as of March 31, 2020 (in thousands): Year Amount 2020 $ 1,188 2021 1,232 2022 1,182 2023 1,031 2024 1,048 2025 and thereafter 4,585 Total lease payments 10,266 Less: Interest (3,016) Net present value of lease liabilities $ 7,250 Current portion $ 922 Long-term portion 6,328 Total $ 7,250 |
Schedule of Weighted Average Remaining Lease Terms and Discount Rates | The weighted-average remaining lease terms and discount rates for all of our operating leases as of March 31, 2020 were as follows: Weighted-average lease term remaining 68 months Weighted-average discount rate 8.92 % |
Long-term Obligations (Tables)
Long-term Obligations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Long-term Obligations | |
Schedule of Total Long-Term Obligations | Total long-term obligations of the Company as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands): March 31, December 31, 2020 2019 Pension obligations - accrued pension liability $ 4,670 $ 4,611 Settlement agreement (1) 652 708 Capital lease obligations 113 127 5,435 5,446 Less: Current portion of long-term obligations 856 912 Totals $ 4,579 $ 4,534 (1) Represents payment to be made pursuant to a settlement agreement entered into in December 2018 between a subsidiary of the Company and 19 former employees of such subsidiary. The balance is payable in monthly installments through March 2023. |
Comprehensive Loss (Tables)
Comprehensive Loss (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Comprehensive Loss | |
Schedule of Accumulated Other Comprehensive Loss | The components of Accumulated other comprehensive loss as of March 31, 2020, and reclassifications out of Accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019, were as follows (net of tax) (in thousands): Foreign Accumulated Pension Fair Value Currency Other Liability of Translation Comprehensive Adjustment Derivatives Adjustment Loss Balance at January 1, 2020 $ (53) $ 33 $ (900) $ (920) Other comprehensive loss before reclassifications, net of taxes — (166) (718) (884) Total other comprehensive loss before reclassifications, net of taxes (53) (133) (1,618) (1,804) Net amount reclassified to earnings 14 (5) - 9 Balance at March 31, 2020 $ (39) $ (138) $ (1,618) $ (1,795) Foreign Accumulated Pension Fair Value Currency Other Liability of Translation Comprehensive Adjustment Derivatives Adjustment Loss Balance at January 1, 2019 $ 1,451 $ — $ (1,466) $ (15) Other comprehensive income before reclassifications, net of taxes — — 264 264 Total other comprehensive income (loss) before reclassifications, net of taxes 1,451 — (1,202) 249 Net amount reclassified to earnings (36) — — (36) Balance at March 31, 2019 $ 1,415 $ — $ (1,202) $ 213 |
Segment Reporting and Concent_2
Segment Reporting and Concentrations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting and Concentrations | |
Schedule of Segment Reporting Information, by Segment | Revenues from external clients and segment operating profit (loss), and other reportable segment information were as follows (in thousands): For the three months ended March 31, 2020 2019 Revenues: DDS $ 10,409 $ 10,177 Synodex 1,282 1,024 Agility 2,839 2,493 Total Consolidated $ 14,530 $ 13,694 Income (loss) before provision for income taxes (1) : DDS $ 129 $ 74 Synodex 196 119 Agility (274) (672) Total Consolidated $ 51 $ (479) Income (loss) before provision for income taxes (2) : DDS $ 59 $ 12 Synodex 241 159 Agility (249) (650) Total Consolidated $ 51 $ (479) March 31, 2020 December 31 , 2019 Total assets: DDS $ 21,537 $ 23,196 Synodex 598 675 Agility 26,741 25,875 Total Consolidated $ 48,876 $ 49,746 March 31, 2020 December 31, 2019 Goodwill: Agility $ 2,003 $ 2,108 Total Consolidated $ 2,003 $ 2,108 (1) Before elimination of any inter-segment profits (2) After elimination of any inter-segment profits |
Schedule of Revenue from External Customers and Long-Lived Assets | The following table summarizes revenues by geographic region (determined and based upon customer’s domicile) (in thousands): For the three months ended March 31, 2020 2019 United States $ 6,690 $ 6,531 United Kingdom 2,771 2,318 The Netherlands 1,640 1,722 Canada 1,545 1,484 Others - principally Europe 1,884 1,639 Totals $ 14,530 $ 13,694 |
Schedule of Revenue from External Customers based on Client domicile | Long-lived assets of the Company as of March 31, 2020 and December 31, 2019, respectively, by geographic region, were comprised of the following (in thousands): March 31, December 31, 2020 2019 United States $ 4,455 $ 4,591 Foreign countries: Canada 8,216 8,876 United Kingdom 1,738 1,907 Philippines 4,998 5,135 India 381 508 Sri Lanka 632 678 Israel 4 19 Germany 1 1 Total foreign 15,970 17,124 Totals $ 20,425 $ 21,715 |
Loss per Share (Tables)
Loss per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Loss per Share | |
Schedule of Earnings Per Share, Basic and Diluted | For the three months ended March 31, 2020 2019 Net loss attributable to Innodata Inc. and Subsidiaries $ (365) $ (452) Weighted average common shares outstanding 24,401 25,927 Dilutive effect of outstanding options — — Adjusted for dilutive computation 24,401 25,927 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivatives | |
Schedule of fair value of derivative instruments | The following table presents the fair value of derivative instruments included within the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands): Balance Sheet Location Fair Value 2020 2019 Derivatives designated as hedging instruments: Foreign currency forward contracts Accrued expenses $ 138 $ — Foreign currency forward contracts Prepaid expenses and other current assets $ — $ 33 |
Schedule | The effects of foreign currency forward contracts designated as cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, respectively, were as follows (in thousands): For the three months ended March 31, 2020 2019 Net gain (loss) recognized in OCI (1) $ (166) $ — Net (gain) loss reclassified from accumulated OCI into income (2) $ (5) $ — Net gain recognized in income (3) $ — $ — (1) Net change in fair value of the effective portion classified into other comprehensive income ("OCI") (2) Effective portion classified within direct operating costs There were no ineffective portions for the period presented. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Addtional Information (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Summary of Significant Accounting Policies | ||
Deferred Revenue | $ 1.3 | $ 1.1 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Goodwill and Intangible Assets | ||
Balance | $ 2,108 | $ 2,050 |
Foreign currency translation adjustment | (105) | 39 |
Balance | $ 2,003 | $ 2,089 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Acquisition-Related Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Gross carrying amounts: | ||
Balance | $ 9,805 | $ 9,523 |
Foreign currency translation | (517) | 178 |
Balance | 9,288 | 9,701 |
Accumulated amortization: | ||
Balance | 4,329 | 3,248 |
Amortization expense | 228 | 242 |
Foreign currency translation | (251) | 60 |
Balance | 4,306 | 3,550 |
Developed technology [Member] | ||
Gross carrying amounts: | ||
Balance | 3,108 | 2,999 |
Foreign currency translation | (206) | 61 |
Balance | 2,902 | 3,060 |
Accumulated amortization: | ||
Balance | 1,493 | 1,137 |
Amortization expense | 78 | 77 |
Foreign currency translation | (111) | 24 |
Balance | 1,460 | 1,238 |
Customer relationships [Member] | ||
Gross carrying amounts: | ||
Balance | 2,177 | 2,081 |
Foreign currency translation | (184) | 47 |
Balance | 1,993 | 2,128 |
Accumulated amortization: | ||
Balance | 983 | 766 |
Amortization expense | 45 | 45 |
Foreign currency translation | (87) | 16 |
Balance | 941 | 827 |
Trademarks and trade names [Member] | ||
Gross carrying amounts: | ||
Balance | 871 | 855 |
Foreign currency translation | (29) | 10 |
Balance | 842 | 865 |
Accumulated amortization: | ||
Balance | 567 | 440 |
Amortization expense | 14 | 30 |
Foreign currency translation | (15) | 4 |
Balance | 566 | 474 |
Patents [Member] | ||
Gross carrying amounts: | ||
Balance | 44 | 42 |
Foreign currency translation | (3) | 1 |
Balance | 41 | 43 |
Accumulated amortization: | ||
Balance | 24 | 19 |
Amortization expense | 1 | 1 |
Foreign currency translation | (2) | |
Balance | 23 | 20 |
Media Contact Database [Member] | ||
Gross carrying amounts: | ||
Balance | 3,605 | 3,546 |
Foreign currency translation | (95) | 59 |
Balance | 3,510 | 3,605 |
Accumulated amortization: | ||
Balance | 1,262 | 886 |
Amortization expense | 90 | 89 |
Foreign currency translation | (36) | 16 |
Balance | $ 1,316 | $ 991 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Estimated Amortization Expense (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Goodwill and Intangible Assets | |
2020 | $ 648 |
2021 | 864 |
2022 | 864 |
2023 | 864 |
2024 | 772 |
Thereafter | 970 |
Finite-Lived Intangible Assets, Net | $ 4,982 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Goodwill and Intangible Assets | ||
Amortization expense | $ 228 | $ 242 |
Intangible Assets, Amortization Period [Member] | ||
Goodwill and Intangible Assets | ||
Amortization expense | $ 200 | $ 200 |
Income Taxes - Tax Rate Reconci
Income Taxes - Tax Rate Reconciliation (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes | ||
Federal income tax expense at statutory rate | 21.00% | 21.00% |
Effect of: | ||
Tax effects of foreign operations | 597.80% | (34.00%) |
Foreign operations permanent difference - foreign exchange gains and losses | 355.30% | 104.20% |
Increase in unrecognized tax benefits (ASC 740) | 165.10% | (36.80%) |
State income tax net of federal benefit | 39.80% | |
Withholding tax | 22.90% | |
Return to provision true up | 1.20% | (28.00%) |
Foreign rate differential | (85.50%) | (8.10%) |
Change in valuation allowance | (193.30%) | (7.90%) |
Other | (130.20%) | (4.60%) |
Effective tax rate | 794.10% | 5.80% |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Income Taxes | |
Balance - January 1, 2020 | $ 2,957 |
Increase in tax position | 75 |
Interest accrual | 45 |
Foreign currency remeasurement | (149) |
Balance - March 31, 2020 | $ 2,928 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |||
Oct. 31, 2016 | Sep. 30, 2015 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Income Taxes [Line Items] | |||||
Income Tax Expense (Benefit) | $ 405,000 | $ (28,000) | |||
Income Tax Examination, Increase (Decrease) in Liability from Prior Year | 100,000 | ||||
Income Tax Examination, Penalties and Interest Accrued | 45,000 | ||||
Unrecognized Tax Benefits | $ 2,928,000 | $ 2,957,000 | |||
Subsidiary Revenue | $ 66,000,000 | ||||
Reversal of Service Tax Refund | $ 160,000 | ||||
Service Tax Credit Receivable | $ 1,000,000 | ||||
Maximum [Member] | |||||
Income Taxes [Line Items] | |||||
Percentage for Subsidiary Service Tax | 15.00% | ||||
Minimum [Member] | |||||
Income Taxes [Line Items] | |||||
Percentage for Subsidiary Service Tax | 12.36% |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Commitments and Contingencies. | |
Estimated Litigation Liability | $ 6,400,000 |
Interest Rate Description Litigation | plus legal interest that accrued at 12% per annum from August 13, 2008 to June 30, 2013, and thereafter accrued and continues to accrue at 6% per annum |
Litigation Settlement, Expense | $ 300,000 |
Stock Options - Summary of Stoc
Stock Options - Summary of Stock Option Activity (Details) - Employee Stock Option [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of Options, Outstanding at January 1, 2020 (in shares) | 6,833,303 |
Number of Options, Granted (in shares) | 0 |
Number of Options, Exercised (in shares) | 0 |
Number of Options, Forfeited/Expired (in shares) | (544,303) |
Number of Options, Outstanding at March 31, 2020 (in shares) | 6,289,000 |
Number of Options Exercisable at March 31, 2020 (in shares) | 4,108,622 |
Number of Options, Vested and Expected to Vest at March 31, 2020 (in shares) | 6,289,000 |
Weighted Average Exercise Price Outstanding at January 1, 2020 (in dollars per shares) | $ / shares | $ 1.86 |
Weighted Average Exercise Price Forfeited/Expired (in dollars per shares) | $ / shares | 3.39 |
Weighted Average Exercise Price Outstanding at March 31, 2020 (in dollars per shares) | $ / shares | 1.73 |
Weighted Average Exercise Price Exercisable at March 31, 2020 (in dollars per shares) | $ / shares | 2.01 |
Weighted Average Exercise Price Vested and Expected to Vest at March 31, 2020 (in dollars per shares) | $ / shares | $ 1.73 |
Weighted Average Remaining Contractual Term Outstanding at March 31, 2020 (in years) | 7 years 2 months 9 days |
Weighted Average Remaining Contractual Term Exercisable at March 31, 2020 (in years) | 6 years 3 months 15 days |
Weighted Average Remaining Contractual Term Vested and Expected to Vest at March 31, 2020 (in years) | 7 years 2 months 9 days |
Stock Options - Weighted Averag
Stock Options - Weighted Average Fair Values and Assumptions (Details) - Employee Stock Option [Member] - $ / shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average fair value of options granted (in dollars per share) | $ 0 | $ 0.64 |
Risk-free interest rate | 2.55% | |
Expected term (years) | 6 years | |
Expected volatility factor | 45.00% | |
Expected dividends | 0.00% | 0.00% |
Stock Options - Summary of Rest
Stock Options - Summary of Restricted Shares (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Stock Options | |
Number of Shares, Granted | shares | 75,000 |
Number of Shares, Vested | shares | (25,000) |
Number of Shares, Forfeited/Expired | shares | 0 |
Number of Shares, Unvested at March 31, 2020 | shares | 50,000 |
Weighted-Average Grant Date Fair Value, Granted | $ / shares | $ 1.38 |
Weighted-Average Grant Date Fair Value, Vested | $ / shares | 0 |
Weighted-Average Grant Date Fair Value, Forfeited/Expired | $ / shares | 0 |
Weighted-Average Grant Date Fair Value, Unvested at March 31, 2020 | $ / shares | $ 1.38 |
Stock Options - Stock-Based Com
Stock Options - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Stock Options | ||
Direct operating costs | $ 40 | $ 18 |
Selling and administrative expenses | 130 | 111 |
Total stock-based compensation | $ 170 | $ 129 |
Stock Options - Additional Info
Stock Options - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Jun. 07, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Employee Service Share-Based Compensation, Nonvested Awards, Total Compensation Cost Not Yet Recognized | $ 1.2 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 23 months | |
2013 Stock Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-Based Compensation Arrangement By Share-Based Payment Award, Number Of Shares Authorized | 5,858,892 |
Operating Leases - Operating Le
Operating Leases - Operating Leases Amount Recognized (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating Leases, Rent Expense | $ 504 | $ 501 |
Long Term Operating Lease [Member] | ||
Operating Leases, Rent Expense | 443 | 415 |
Short Term Operating Lease [Member] | ||
Operating Leases, Rent Expense | $ 61 | $ 86 |
Operating Leases - Net Present
Operating Leases - Net Present Value of Operating Lease Liability (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Operating Leases | ||
2020 | $ 1,188 | |
2021 | 1,232 | |
2022 | 1,182 | |
2023 | 1,031 | |
2024 | 1,048 | |
2025 and thereafter | 4,585 | |
Total lease payments | 10,266 | |
Less: Interest | (3,016) | |
Net present value of lease liabilities | 7,250 | |
Current portion | 922 | $ 1,107 |
Long- term portion | 6,328 | $ 6,731 |
Total | $ 7,250 |
Operating Leases - Weighted Ave
Operating Leases - Weighted Average Remaining Lease Terms (Details) | Mar. 31, 2020 |
Operating Leases | |
Weighted-average lease term remaining | 68 months |
Weighted-average discount rate | 8.92% |
Operating Leases - Additional I
Operating Leases - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Minimum [Member] | |
Lessee, Operating Lease, Term of Contract | 2 years |
Percentage of Rental Escalations | 1.75% |
Maximum [Member] | |
Lessee, Operating Lease, Term of Contract | 11 years |
Percentage of Rental Escalations | 10.00% |
Long-term Obligations (Details)
Long-term Obligations (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Pension obligations | ||
Pension obligations - accrued pension liability | $ 4,670 | $ 4,611 |
Settlement agreement | 652 | 708 |
Capital lease obligations | 113 | 127 |
Long-term Debt | 5,435 | 5,446 |
Less: Current portion of long-term obligations | 856 | 912 |
Totals | $ 4,579 | $ 4,534 |
Comprehensive Loss - Reclassifi
Comprehensive Loss - Reclassifications out of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | $ 26,309 | $ 30,566 |
Balance | 25,239 | 30,471 |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | (920) | (15) |
Other comprehensive income (loss) before reclassifications, net of taxes | (884) | 264 |
Total other comprehensive income (loss) before reclassifications, net of taxes | (1,804) | 249 |
Net amount reclassified to earnings | 9 | (36) |
Balance | (1,795) | 213 |
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | (53) | 1,451 |
Total other comprehensive income (loss) before reclassifications, net of taxes | (53) | 1,451 |
Net amount reclassified to earnings | 14 | (36) |
Balance | (39) | 1,415 |
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | 33 | |
Other comprehensive income (loss) before reclassifications, net of taxes | (166) | |
Total other comprehensive income (loss) before reclassifications, net of taxes | (133) | |
Net amount reclassified to earnings | (5) | |
Balance | (138) | |
Accumulated Foreign Currency Adjustment Attributable to Parent [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | (900) | (1,466) |
Other comprehensive income (loss) before reclassifications, net of taxes | (718) | 264 |
Total other comprehensive income (loss) before reclassifications, net of taxes | (1,618) | (1,202) |
Balance | $ (1,618) | $ (1,202) |
Segment Reporting and Concent_3
Segment Reporting and Concentrations (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Segment reporting information | ||||
Revenues | $ 14,530 | $ 13,694 | ||
Income (loss) before provision for income taxes | 51 | (479) | ||
Total assets | 48,876 | $ 49,746 | ||
Goodwill | 2,003 | 2,089 | 2,108 | $ 2,050 |
Before Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | 51 | (479) | ||
After Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | 51 | (479) | ||
DDS [Member] | ||||
Segment reporting information | ||||
Revenues | 10,409 | 10,177 | ||
Total assets | 21,537 | 23,196 | ||
DDS [Member] | Before Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | 129 | 74 | ||
DDS [Member] | After Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | 59 | 12 | ||
Synodex [Member] | ||||
Segment reporting information | ||||
Revenues | 1,282 | 1,024 | ||
Total assets | 598 | 675 | ||
Synodex [Member] | Before Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | 196 | 119 | ||
Synodex [Member] | After Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | 241 | 159 | ||
Agility [Member] | ||||
Segment reporting information | ||||
Revenues | 2,839 | 2,493 | ||
Total assets | 26,741 | 25,875 | ||
Goodwill | 2,003 | $ 2,108 | ||
Agility [Member] | Before Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | (274) | (672) | ||
Agility [Member] | After Intersegment Eliminations [Member] | ||||
Segment reporting information | ||||
Income (loss) before provision for income taxes | $ (249) | $ (650) |
Segment Reporting and Concent_4
Segment Reporting and Concentrations - Long-lived assets (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | $ 20,425 | $ 21,715 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 4,455 | 4,591 |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 8,216 | 8,876 |
United Kingdom | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 1,738 | 1,907 |
Philippines [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 4,998 | 5,135 |
India [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 381 | 508 |
Sri Lanka [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 632 | 678 |
Israel [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 4 | 19 |
Germany [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 1 | 1 |
Foreign Countries [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | $ 15,970 | $ 17,124 |
Segment Reporting and Concent_5
Segment Reporting and Concentrations - Revenues by geographic region (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 14,530 | $ 13,694 |
Other - principally Europe | ||
Segment Reporting Information [Line Items] | ||
Revenues | 1,884 | 1,639 |
United States | ||
Segment Reporting Information [Line Items] | ||
Revenues | 6,690 | 6,531 |
United Kingdom | ||
Segment Reporting Information [Line Items] | ||
Revenues | 2,771 | 2,318 |
The Netherlands | ||
Segment Reporting Information [Line Items] | ||
Revenues | 1,640 | 1,722 |
Canada | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 1,545 | $ 1,484 |
Segment Reporting and Concent_6
Segment Reporting and Concentrations - Additional information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020USD ($)segmentclient | Mar. 31, 2019USD ($)client | Dec. 31, 2019USD ($)client | |
Segment Reporting Information [Line Items] | |||
Number of Reportable Segments | segment | 3 | ||
Operating Lease, Right-of-Use Asset | $ | $ 6,530 | $ 7,005 | |
Revenues | $ | $ 14,530 | $ 13,694 | |
Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Concentration Risk, Percentage | 10.00% | 10.00% | |
Foreign Customer [Member] | Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Concentration Risk, Percentage | 54.00% | 52.00% | |
Foreign Customer [Member] | Accounts Receivable [Member] | |||
Segment Reporting Information [Line Items] | |||
Concentration Risk, Percentage | 59.00% | 60.00% | |
One Client [Member] | Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 1 | 1 | |
Concentration Risk, Percentage | 14.00% | 16.00% | |
Two clients [Member] | Accounts Receivable [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 2 | ||
Concentration Risk, Percentage | 28.00% | ||
Three Clients [Member] | Accounts Receivable [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 3 | ||
Concentration Risk, Percentage | 44.00% | ||
Client [Member] | Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 0 | 0 | |
Concentration Risk, Percentage | 10.00% | 10.00% |
Loss per Share (Details)
Loss per Share (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Loss per Share | ||
Net loss attributable to Innodata Inc. and Subsidiaries | $ (365) | $ (452) |
Weighted average common shares outstanding | 24,401 | 25,927 |
Dilutive effect of outstanding options | 0 | 0 |
Adjusted for dilutive computation | 24,401 | 25,927 |
Loss Per Share - Additional inf
Loss Per Share - Additional information (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Employee Stock Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded From Computation Of Earnings Per Share, Amount | 6.3 | 5 |
Derivatives - (Details)
Derivatives - (Details) - Foreign Exchange Forward [Member] - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Accrued expenses [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedging instruments | $ 138 | |
Prepaid expenses and other current assets [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivatives designated as hedging instruments | $ 33 |
Derivatives - Contracts designa
Derivatives - Contracts designated as cash flow hedges (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Derivatives | |
Net gain (loss) recognized in OCI(1) | $ (166) |
Net (gain) loss reclassified from accumulated OCI into income(2) | $ (5) |
Derivatives - Additional Inform
Derivatives - Additional Information (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Derivatives | ||
Derivative, Notional Amount | $ 3.2 | $ 4.3 |
Subsequent Event (Details)
Subsequent Event (Details) - Paycheck Protection Program Loan [Member] - Subsequent Event [Member] | May 04, 2020USD ($) |
Proceeds from Issuance of Debt | $ 579,700 |
Unforgiven portion of loan payable term | 2 years |
Interest rate | 1.00% |