Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 04, 2021 | |
Cover | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2021 | |
Document Fiscal Year Focus | 2021 | |
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 | |
Title of 12(b) Security | Common Stock | |
Security Exchange Name | NASDAQ | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Common Stock, Shares Outstanding | 26,316,813 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 17,296 | $ 17,573 |
Accounts receivable, net of allowance for doubtful accounts of $680 and $670, respectively | 9,969 | 10,048 |
Prepaid expenses and other current assets | 3,987 | 4,240 |
Total current assets | 31,252 | 31,861 |
Property and equipment, net | 7,291 | 7,227 |
Right-of-use-asset, net | 6,377 | 6,610 |
Other assets | 2,507 | 2,563 |
Deferred income taxes, net | 2,270 | 2,187 |
Intangibles, net | 4,437 | 4,656 |
Goodwill | 2,157 | 2,150 |
Total assets | 56,291 | 57,254 |
Current liabilities: | ||
Accounts payable | 1,287 | 1,435 |
Accrued expenses and other | 4,130 | 3,490 |
Accrued salaries, wages and related benefits | 4,919 | 5,719 |
Income and other taxes | 4,237 | 5,000 |
Long-term obligations - current portion | 2,134 | 1,712 |
Operating lease liability - current portion | 1,017 | 990 |
Total current liabilities | 17,724 | 18,346 |
Deferred income taxes | 68 | 44 |
Long-term obligations, net of current portion | 5,660 | 6,282 |
Operating lease liability, net of current portion | 6,066 | 6,332 |
Total liabilities | 29,518 | 31,004 |
Commitments and contingencies | ||
Non-controlling interests | (3,379) | (3,390) |
STOCKHOLDERS' EQUITY: | ||
Serial preferred stock; 4,998,000 shares authorized, none outstanding | 0 | 0 |
Common stock, $.01 par value; 75,000,000 shares authorized; 29,481,000 shares issued and 26,297,000 outstanding at March 31, 2021 and 28,984,000 shares issued and 25,800,000 outstanding at December 31, 2020; | 294 | 289 |
Additional paid-in capital | 32,040 | 31,921 |
Retained earnings | 5,231 | 4,833 |
Accumulated other comprehensive loss | (948) | (938) |
Stockholders' Equity before Treasury Stock, Total | 36,617 | 36,105 |
Less: treasury stock, 3,184,000 shares at March 31, 2021 and December 31, 2020 at cost | (6,465) | (6,465) |
Total stockholders' equity | 30,152 | 29,640 |
Total liabilities and stockholders' equity | $ 56,291 | $ 57,254 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, net of allowance for doubtful accounts | $ 680 | $ 670 |
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 | 29,481,000 | 28,984,000 |
Common stock, shares outstanding | 26,297,000 | 25,800,000 |
Treasury stock, shares | 3,184,000 | 3,184,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||
Revenues | $ 15,967,000 | $ 14,530,000 |
Operating costs and expenses: | ||
Direct operating costs | 10,096,000 | 9,743,000 |
Selling and administrative expenses | 5,525,000 | 4,620,000 |
Interest expense, net | 10,000 | 42,000 |
Total | 15,631,000 | 14,405,000 |
Income before provision for income taxes | 336,000 | 125,000 |
Provision for income taxes | (73,000) | 405,000 |
Consolidated net income (loss) | 409,000 | (280,000) |
Income attributable to non-controlling interests | 11,000 | 11,000 |
Net income (loss) attributable to Innodata Inc. and Subsidiaries | $ 398,000 | $ (291,000) |
Income (loss) per share attributable to Innodata Inc. and Subsidiaries: | ||
Basic | $ (0.02) | $ 0.01 |
Diluted | $ 0.01 | $ (0.01) |
Weighted average shares outstanding: | ||
Basic | 25,873 | 24,401 |
Diluted | 29,452 | 24,401 |
Comprehensive income (loss): | ||
Consolidated net income (loss) | $ 409,000 | $ (280,000) |
Pension liability adjustment, net of taxes | 11,000 | 14,000 |
Change in fair value of derivatives, net of taxes | 0 | (171,000) |
Foreign currency translation adjustment, net of taxes | (21,000) | (718,000) |
Other comprehensive loss | (10,000) | (875,000) |
Total comprehensive income (loss) | 399,000 | (1,155,000) |
Less: Comprehensive income attributable to non-controlling interest | 11,000 | 11,000 |
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries | $ 388,000 | $ (1,166,000) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Consolidated net income (loss) | $ 409 | $ (280) |
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 697 | 630 |
Stock-based compensation | 278 | 170 |
Deferred income taxes | (45) | (71) |
Pension cost | 142 | 200 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (448) | (92) |
Prepaid expenses and other current assets | 223 | (449) |
Other assets | 52 | (336) |
Accounts payable and accrued expenses | 956 | 662 |
Accrued salaries, wages and related benefits | (789) | (53) |
Income and other taxes | (718) | 369 |
Net cash provided by operating activities | 757 | 750 |
Cash flows from investing activities: | ||
Capital expenditures | (503) | (578) |
Net cash used in investing activities | (503) | (578) |
Cash flows from financing activities: | ||
Proceeds from stock option exercises | 609 | |
Withholding taxes on stock-based compensation | (764) | |
Payment of long-term obligations | (268) | (104) |
Net cash used in financing activities | (423) | (104) |
Effect of exchange rate changes on cash and cash equivalents | (108) | (197) |
Net decrease in cash and cash equivalents | (277) | (129) |
Cash and cash equivalents, beginning of period | 17,573 | 10,874 |
Cash and cash equivalents, end of period | 17,296 | 10,745 |
Supplemental disclosures of cash flow information: | ||
Shares withheld for withholding taxes on net settlement for stock-based compensation | 763 | |
Cash paid for income taxes | 571 | |
Cash paid for operating leases | 437 | 615 |
Cash paid for interest | $ 11 | $ 44 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balance at Dec. 31, 2019 | $ 275,000 | $ 28,426,000 | $ 4,993,000 | $ (920,000) | $ (6,465,000) | $ 26,309,000 |
Balance (in shares) at Dec. 31, 2019 | 27,643,000 | |||||
Balance (in shares) at Dec. 31, 2019 | 3,184,000 | |||||
Net income (loss) attributable to Innodata Inc. and Subsidiaries | $ 0 | 0 | (291,000) | 0 | $ 0 | (291,000) |
Stock-based compensation | $ 0 | 170,000 | 0 | 0 | 0 | 170,000 |
Stock based compensation (in shares) | 0 | |||||
Pension liability adjustments, net of taxes | $ 0 | 0 | 0 | 14,000 | 0 | 14,000 |
Foreign currency translation adjustment, net of taxes | 0 | 0 | 0 | (718,000) | 0 | (718,000) |
Change in fair value of derivatives, net of taxes | 0 | 0 | 0 | (171,000) | 0 | (171,000) |
Balance at Mar. 31, 2020 | $ 275,000 | 28,596,000 | 4,702,000 | (1,795,000) | $ (6,465,000) | 25,313,000 |
Balance (in shares) at Mar. 31, 2020 | 27,643,000 | |||||
Balance (in shares) at Mar. 31, 2020 | 3,184,000 | |||||
Balance at Dec. 31, 2020 | $ 289,000 | 31,921,000 | 4,833,000 | (938,000) | $ (6,465,000) | $ 29,640,000 |
Balance (in shares) at Dec. 31, 2020 | 28,984,000 | |||||
Balance (in shares) at Dec. 31, 2020 | 3,184,000 | 3,184,000 | ||||
Net income (loss) attributable to Innodata Inc. and Subsidiaries | $ 0 | 0 | 398,000 | 0 | $ 0 | $ 398,000 |
Stock-based compensation | $ 0 | 278,000 | 0 | 0 | 0 | 278,000 |
Stock based compensation (in shares) | 0 | |||||
Exercise of stock options | $ 4,000 | 605,000 | 0 | 0 | 0 | 609,000 |
Exercise of stock options (in shares) | 690,000 | |||||
Shares withheld for exercise settlement and taxes | $ 1,000 | (764,000) | 0 | 0 | 0 | (763,000) |
Shares withheld for exercise settlement and taxes (in shares) | (193,000) | |||||
Pension liability adjustments, net of taxes | $ 0 | 0 | 0 | 11,000 | 0 | 11,000 |
Foreign currency translation adjustment, net of taxes | 0 | 0 | 0 | (21,000) | 0 | (21,000) |
Change in fair value of derivatives, net of taxes | 0 | 0 | 0 | 0 | 0 | 0 |
Balance at Mar. 31, 2021 | $ 294,000 | $ 32,040,000 | $ 5,231,000 | $ (948,000) | $ (6,465,000) | $ 30,152,000 |
Balance (in shares) at Mar. 31, 2021 | 29,481,000 | |||||
Balance (in shares) at Mar. 31, 2021 | 3,184,000 | 3,184,000 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
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 Innodata Inc. (including its subsidiaries, the “Company”, “we”, “our” and “us”) as of March 31, 2021, the results of its operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020, cash flows for the three months ended March 31, 2021 and 2020, and stockholders’ equity for the three months ended March 31, 2021 and 2020. 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 or with 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the consolidated financial statements for the year ended December 31, 2020. 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 intercompany transactions and balances have been eliminated in consolidation. Use of Estimates - In preparing the 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 as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are reasonable, and management has made assumptions about the possible effects of the novel coronavirus (“COVID-19”) pandemic on critical and significant accounting estimates. Actual results could differ from those estimates and changes in those estimates are recorded when known . Significant estimates include those related to the allowance for doubtful accounts and billing adjustments, useful life of long-lived assets, useful life of intangible assets, impairment of goodwill, valuation of deferred tax assets, valuation of stock-based compensation, litigation accruals and estimated accruals for various tax exposures. Capitalized Software Development Costs - the Company incurs development costs related to software it develops for its internal use. Qualifying costs incurred during the application development stage are capitalized. These costs primarily consist of internal labor and are amortized using the straight-line method over the estimated useful life of the software, which ranges between three and ten years. All other research and maintenance costs are expensed as incurred. Capitalized software development costs-in progress as of March 31, 2021 and December 31, 2020 were $0.3 million and $1.4 million, respectively. Completed capitalized software and development cost as of March 31, 2021 and December 31, 2020 were $7.1 million and $5.5 million, respectively. 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 accompanying condensed consolidated balance sheets is deferred revenue amounting to $2.0 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively. Revenue Recognition – The Company’s revenue is recognized when services are rendered or goods are delivered to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services or goods as per the agreement with the customer. In cases where there are agreements with multiple performance obligations, the Company identifies each performance obligation and evaluates whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. For agreements with distinct performance obligations, 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 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 the Synodex segment revenue is derived from licensing our functional software and providing access to the Company’s 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 the gross amount received for the goods in accordance with our functioning as a principal due to our meeting the following criteria: the Company acts as the primary obligor in the sales transaction; assumes the credit risk; sets the price; can select suppliers; and is 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 gross revenue as a principal versus net revenue as an agent. The Company evaluates whether it is in control of the services before the same are transferred to the customer to assess whether it is principal or agent in the arrangement. Revenues are recognized on a gross basis if the Company is in the capacity of principal and on a net basis if it falls in the capacity of an agent. Contract acquisition costs, which are included in prepaid expenses and other current assets, are amortized over the term of a subscription agreement or contract. The Company reviews these prepaid acquisition costs on a periodic basis to determine the need to adjust the carrying values for early-terminated contracts. Foreign Currency - The functional currency of our locations in the Philippines, India, Sri Lanka, Israel and Hong Kong is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees, Israeli shekels and Hong Kong dollars are translated to U.S. dollars at rates which approximate those in effect on the transaction dates. Monetary assets and all liabilities denominated in foreign currencies at March 31, 2021 and December 31, 2020 are translated at the exchange rate in effect as of those dates. Nonmonetary assets and stockholders’ equity are translated at the appropriate historical rates. Included in direct operating costs were foreign exchange gains (losses) resulting from such transactions of approximately $140,000 and $(77,000) for the three months ended March 31, 2021 and 2020, respectively. 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 Company’s condensed consolidated financial statements. Revenues, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal periods, 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 income (loss). The amount of foreign currency translation adjustment was $21,000 and $718,000 for the three months ended March 31, 2021 and 2020, respectively. Derivative Instruments - The Company accounts for derivative transactions in accordance with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 825, “Financial Instruments,” with the corresponding unrealized gain or loss recognized as part of direct operating costs. Income Taxes – Estimated deferred taxes are determined based on the difference between the financial statement and tax basis 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 estimated 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 anticipates that it will be able to realize the estimated deferred tax assets in the future in excess of its net recorded amount, an adjustment to the provision for deferred tax assets would increase income in the period such determination was made. Similarly, in the event that the Company anticipates that it will not be able to realize the estimated deferred tax assets in the future considering future taxable income, an adjustment to the provision for 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 . If such earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, the Company would have to accrue as a liability the applicable amount of foreign jurisdiction withholding taxes associated with such remittances. 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 entities cannot be predicted with certainty, the Company maintains a valuation allowance against all the U.S. and Canadian net 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 income (loss). Recent Accounting Pronouncements - In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards. The standard eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.The Company adopted the standard on January 1, 2021 and it had no material impact on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements” (“ASU 2016-13”). ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation amount that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” which clarifies ASC 326, “Financial Instruments – Credit Losses” and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments,” which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 is effective for certain smaller reporting companies for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2023 for us if we continue to be classified as a smaller reporting company, with early adoption permitted. We do not expect that the adoption of the new guidance will have a material impact on our condensed consolidated financial statements. Correction of Immaterial Errors – During the preparation of the September 30, 2020 condensed consolidated financial statements, certain historical errors were identified relating to the accounting for capital leases under ASC Topics 840 and 842,both relating to lease accounting. The lease obligations under certain leases were not recorded at their present values at the inception of the leases, resulting in an overstatement of expenses for the three months ended March 31, 2020. The errors were not material, either quantitatively or qualitatively, in any of the reported periods. However, the corrections, if recorded in the three-month period ended September 30, 2020, would have been material to such period. Accordingly, the March 31, 2020 financial statements included in this Form 10-Q are being corrected by revising such financial statements, as follows: · A decrease in expenses of $74,000 for the three months ended March 31, 2020. There was no impact on the loss per share for the three-month period ended March 31, 2020. · A decrease in liabilities of $51,000 as of March 31, 2020. · An increase in total assets of $23,000 as of March 31, 2020. · The impact on cash flows for the three months ended March 31, 2020 was: · An increase in cash flows provided by operating activities of $47,000. · An increase in cash flows used in financing activities of $47,000. The Company evaluated the errors under Staff Accounting Bulletins 99 and 108 and concluded that a restatement of the March 31, 2020 condensed consolidated financial statements is not required. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 2. Goodwill and Intangible Assets The change in the carrying amount of goodwill for the three months ended March 31, 2021 was as follows (in thousands): Balance as of January 1, 2021 $ 2,150 Foreign currency translation adjustment 7 Balance as of March 31, 2021 $ 2,157 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, 2021 $ 3,175 $ 2,228 $ 882 $ 45 $ 3,670 $ 10,000 Foreign currency translation 18 18 2 1 (1) 38 Balance as of March 31, 2021 $ 3,193 $ 2,246 $ 884 $ 46 $ 3,669 $ 10,038 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Accumulated amortization: Balance as of January 1, 2021 $ 1,844 $ 1,192 $ 629 $ 29 $ 1,650 $ 5,344 Amortization expense 79 46 14 1 91 231 Foreign currency translation 12 10 1 1 2 26 Balance as of March 31, 2021 $ 1,935 $ 1,248 $ 644 $ 31 $ 1,743 $ 5,601 Net carrying values - March 31, 2021 $ 1,258 $ 998 $ 240 $ 15 $ 1,926 $ 4,437 Amortization expense relating to acquisition-related intangible assets was $0.2 million for the three months ended March 31, 2021. As of March 31, 2021, estimated future amortization expense for intangible assets is as follows (in thousands): Year Amortization 2021 $ 701 2022 935 2023 935 2024 831 2025 685 Thereafter 350 $ 4,437 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2021 | |
Income Taxes | |
Income Taxes | 3. Income Taxes 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 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, 2021 and 2020 are summarized in the table below: For the Three Months Ended March 31, 2021 2020 Federal income tax expense at statutory rate 21.0 % 21.0 % Effect of: Tax effects of foreign operations 85.2 242.7 Change in valuation allowance 26.7 (78.5) Foreign operations permanent difference - foreign exchange gains and losses 15.4 144.3 State income tax net of federal benefit 2.4 16.2 Return to provision true up 0.4 (50.6) Withholding tax 0.3 9.3 Foreign rate differential (5.8) (34.7) Effect of stock based compensation (61.3) — Increase (decrease) in unrecognized tax benefits (ASC 740) (114.9) 67.1 Other 8.9 (12.8) Effective tax rate (21.7) % 324.0 % The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2021 (in thousands): Unrecognized tax benefits Balance - January 1, 2021 $ 3,231 Increase for current period tax positions 61 Decrease for prior period tax positions (1,476) Interest accrual 30 Foreign currency remeasurement (4) Balance - March 31, 2021 $ 1,842 The Company expects that unrecognized tax benefits as of March 31, 2021 if recognized, would have a material impact on the Company’s effective tax rate. 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 $64.0 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 (and subsequent periods) in which the rulings or recovery occurs. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | 4. Commitments and Contingencies 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 $6.8 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 in the period in which the ruling or recovery occurs . 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 $350,000 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 and Restricted Sh
Stock Options and Restricted Shares | 3 Months Ended |
Mar. 31, 2021 | |
Stock Options and Restricted Shares | |
Stock Options and Restricted Shares | 5. Stock Options and Restricted Shares A summary of stock option activity under the Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016 (the Plan), as of March 31, 2021, and changes during the three months then ended, are presented below: Weighted - Weighted-Average Number of Average Exercise Remaining Contractual Aggregate Options Price Term (years) Intrinsic Value Outstanding at January 1, 2021 5,906,884 $ 1.61 Granted 360,000 6.40 Exercised (689,616) 2.17 Forfeited/Expired (13,333) 1.38 Outstanding at March 31, 2021 5,563,935 $ 1.86 7.69 $ 24,770,815 Exercisable at March 31, 2021 3,594,434 $ 1.68 7.10 $ 16,621,389 Vested and Expected to Vest at March 31, 2021 5,563,935 $ 1.86 7.69 $ 24,770,815 During the three months ended March 31, 2021, a total of 689,616 options were exercised at an average price of $2.17 for an aggregate value of $1,497,382. 186,816 of the exercised stock options were surrendered to the Company as payment of the exercise price and minimum tax withholdings resulting from the stock options exercised. 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, 2021 Weighted average fair value of options granted $ 3.33 Risk-free interest rate 0.22%-0.82 % Expected term (years) 2.96-6.0 Expected volatility factor 59.62 % Expected dividends — A summary of restricted shares under the Plan as of March 31, 2021 are presented below: Weighted-Average Grant Date Fair Number of Shares Value Unvested at December 31, 2020 50,000 Granted — Vested (25,000) Forfeited/Expired — Unvested at March 31, 2021 25,000 $ 1.38 During the three months ended March 31, 2021, 25,000 restricted shares vested and 6,597 of the vested shares were surrendered to the Company as payment of minimum tax withholdings resulting from the vesting of the shares. The compensation cost related to non-vested stock options and restricted stock awards not yet recognized as of March 31, 2021 totaled approximately $2.0 million. The weighted-average period over which these costs will be recognized is twenty-six 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, 2021 2020 Direct operating costs $ 38 $ 40 Selling and administrative expenses 240 130 Total stock-based compensation $ 278 $ 170 |
Operating Leases
Operating Leases | 3 Months Ended |
Mar. 31, 2021 | |
Operating Leases | |
Operating Leases | 6. Operating Leases The Company has various 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 to the contract. The table below summarizes the amounts recognized in the condensed consolidated financial statements related to operating leases for the periods presented (in thousands): For the Three Months Ended March 31, 2021 2020 Rent expense for long-term operating leases $ 388 $ 443 Rent expense for short-term leases 49 172 Total rent expense $ 437 $ 615 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, 2021 (in thousands): Year Amount 2021 $ 1,568 2022 1,476 2023 1,172 2024 1,033 2025 1,049 2026 and thereafter 3,228 Total lease payments 9,526 Less: Interest (2,443) Net present value of lease liabilities $ 7,083 Current portion $ 1,017 Long-term portion 6,066 Total $ 7,083 The weighted average remaining lease terms and discount rates for all of our operating leases as of March 31, 2021 were as follows: Weighted-average lease term remaining 63 months Weighted-average discount rate 8.68 % |
Long-term obligations
Long-term obligations | 3 Months Ended |
Mar. 31, 2021 | |
Long-term obligations | |
Long-term obligations | 7. Long-term obligations Total long-term obligations as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands): March 31, December 31, 2021 2020 Pension obligations - accrued pension liability $ 6,015 $ 5,940 Settlement agreement (1) 456 518 Capital lease obligations — 209 Microsoft licenses (2) 743 747 Bank loans payable (3) 580 580 7,794 7,994 Less: Current portion of long-term obligations 2,134 1,712 Totals $ 5,660 $ 6,282 (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. (2) On April 2020, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2023. Pursuant to this agreement, the Company was obligated to pay approximately $0.4 million annually over the term of the agreement. (3) On May 4, 2020, the Company received loan proceeds of $579,700 under the Paycheck Protection Program (“PPP”) which was established as part of the Coronavirus Aid, Relief and Economic Security Act of 2020, as amended. 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. On January 29, 2021, the Company filed its loan forgiveness application for 100% of the approved loan under the PPP. |
Comprehensive loss
Comprehensive loss | 3 Months Ended |
Mar. 31, 2021 | |
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 adjustment, net of taxes and changes in fair value of derivatives, net of taxes. The components of accumulated other comprehensive loss as of March 31, 2021 and 2020, and reclassifications out of accumulated other comprehensive loss for the three months then ended, are presented below (in thousands): Foreign Currency Pension Liability Fair Value of Translation Accumutaled Other Adjustment Derivatives Adjustment Comprehensive Loss Balance at January 1, 2021 $ (444) $ — $ (494) $ (938) Other comprehensive loss before reclassifications, net of taxes — — (21) (21) Total other comprehensive loss before reclassifications, net of taxes (444) — (515) (959) Net amount reclassified to earnings 11 — — 11 Balance at March 31, 2021 $ (433) $ — $ (515) $ (948) Foreign Currency Pension Liability Fair Value of Translation Accumutaled Other Adjustment Derivatives Adjustment Comprehensive 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) 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, 2021 | |
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 are 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 for the periods presented were as follows (in thousands): For the Three Months Ended March 31, 2021 2020 Revenues: DDS $ 11,764 $ 10,409 Synodex 1,018 1,282 Agility 3,185 2,839 Total Consolidated $ 15,967 $ 14,530 Income (loss) before provision for income taxes (1) : DDS $ 654 $ 203 Synodex 108 196 Agility (426) (274) Total Consolidated $ 336 $ 125 Income (loss) before provision for income taxes (2) : DDS $ 584 $ 133 Synodex 152 241 Agility (400) (249) Total Consolidated $ 336 $ 125 March 31, 2021 December 31, 2020 Total assets: DDS $ 26,948 $ 27,767 Synodex 129 457 Agility 29,214 29,030 Total Consolidated $ 56,291 $ 57,254 March 31, 2021 December 31, 2020 Goodwill: Agility $ 2,157 $ 2,150 Total $ 2,157 $ 2,150 (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, 2021 2020 United States $ 8,220 $ 6,694 United Kingdom 2,802 2,771 The Netherlands 1,654 1,640 Canada 1,595 1,545 Others - principally Europe 1,696 1,880 Totals $ 15,967 $ 14,530 Long-lived assets as of March 31, 2021 and 2020 by geographic region were comprised of (in thousands): March 31, December 31, 2021 2020 United States $ 3,901 $ 4,045 Foreign countries: Canada 9,160 9,044 United Kingdom 1,703 1,759 Philippines 4,386 4,545 India 833 930 Sri Lanka 279 319 Israel — 1 Total foreign 16,361 16,598 Totals $ 20,262 $ 20,643 Long-lived assets include the unamortized balance of right-of-use assets amounting to $6.4 million and $6.6 million as of March 31, 2021 and December 31, 2020, respectively. One client in the DDS segment generated approximately 12% and 14% of the Company’s total revenues for the three months ended March 31, 2021 and March 31, 2020, respectively. No other client accounted for 10% or more of total revenues during these periods. Further, revenues from non-U.S. clients accounted for 49% and 54% of the Company’s total revenues for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, approximately 48% of the Company’s accounts receivable was from foreign (principally European) clients and 45% of the Company’s accounts receivable was due from four clients. As of December 31, 2020, approximately 55% of the Company’s accounts receivable was from foreign (principally European) clients and 36% of the Company’s accounts receivable was due from three clients. |
Income (Loss) per Share
Income (Loss) per Share | 3 Months Ended |
Mar. 31, 2021 | |
Income (Loss) Per Share | |
Income (Loss) Per Share | 10. Income (Loss) Per Share For the Three Months Ended March 31, 2021 2020 Net income (loss) attributable to Innodata Inc. and Subsidiaries $ 398 $ (291) Weighted average common shares outstanding 25,873 24,401 Dilutive effect of outstanding options 3,579 — Adjusted for dilutive computation 29,452 24,401 Basic income (loss) per share is computed using the weighted-average number of common shares outstanding during the year. Diluted income (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 income (loss) per share is used. Options to purchase 0.3 million shares of common stock for the three months ended March 31, 2021, were outstanding but not included in the computation of diluted income (loss) per share because the exercise price of the options were greater than the average market price of the common shares and therefore the effect would have been anti-dilutive. Options to purchase 6.3 million shares of common stock for the three months ended March 31, 2020 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, 2021 | |
Derivatives | |
Derivatives | 11. Derivatives The Company conducts a large portion of its operations in international markets, which 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 is also subject to wage inflation and other government mandated increases and operating expenses in Asian countries where the Company has the majority of its operations. The Company’s primary inflation and 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 revenue is denominated in U.S. dollars, a significant portion of total revenues is denominated in Canadian dollars, Pound Sterling and Euros. The Company was previously following hedge accounting guidelines and formally documented all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. However, commencing November 2020, the Company discontinued this practice. 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 was $5.8 million and $6.9 million as of March 31, 2021 and December 31, 2020, respectively. The effect of foreign currency forward contracts designated as cash flow hedges on the condensed consolidated statements of operations for the years ended March 31, 2021 and 2020 were as follows (in thousands): For the Three Months Ended March 31, 2021 2020 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
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 Innodata Inc. (including its subsidiaries, the “Company”, “we”, “our” and “us”) as of March 31, 2021, the results of its operations and comprehensive income (loss) for the three months ended March 31, 2021 and 2020, cash flows for the three months ended March 31, 2021 and 2020, and stockholders’ equity for the three months ended March 31, 2021 and 2020. 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 or with 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the consolidated financial statements for the year ended December 31, 2020. |
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 intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates - In preparing the 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 as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are reasonable, and management has made assumptions about the possible effects of the novel coronavirus (“COVID-19”) pandemic on critical and significant accounting estimates. Actual results could differ from those estimates and changes in those estimates are recorded when known . Significant estimates include those related to the allowance for doubtful accounts and billing adjustments, useful life of long-lived assets, useful life of intangible assets, impairment of goodwill, valuation of deferred tax assets, valuation of stock-based compensation, litigation accruals and estimated accruals for various tax exposures. |
Capitalized Software Development Costs | Capitalized Software Development Costs - the Company incurs development costs related to software it develops for its internal use. Qualifying costs incurred during the application development stage are capitalized. These costs primarily consist of internal labor and are amortized using the straight-line method over the estimated useful life of the software, which ranges between three and ten years. All other research and maintenance costs are expensed as incurred. Capitalized software development costs-in progress as of March 31, 2021 and December 31, 2020 were $0.3 million and $1.4 million, respectively. Completed capitalized software and development cost as of March 31, 2021 and December 31, 2020 were $7.1 million and $5.5 million, respectively. |
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 accompanying condensed consolidated balance sheets is deferred revenue amounting to $2.0 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively. |
Revenue Recognition | Revenue Recognition – The Company’s revenue is recognized when services are rendered or goods are delivered to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services or goods as per the agreement with the customer. In cases where there are agreements with multiple performance obligations, the Company identifies each performance obligation and evaluates whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. For agreements with distinct performance obligations, 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 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 the Synodex segment revenue is derived from licensing our functional software and providing access to the Company’s 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 the gross amount received for the goods in accordance with our functioning as a principal due to our meeting the following criteria: the Company acts as the primary obligor in the sales transaction; assumes the credit risk; sets the price; can select suppliers; and is 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 gross revenue as a principal versus net revenue as an agent. The Company evaluates whether it is in control of the services before the same are transferred to the customer to assess whether it is principal or agent in the arrangement. Revenues are recognized on a gross basis if the Company is in the capacity of principal and on a net basis if it falls in the capacity of an agent. Contract acquisition costs, which are included in prepaid expenses and other current assets, are amortized over the term of a subscription agreement or contract. The Company reviews these prepaid acquisition costs on a periodic basis to determine the need to adjust the carrying values for early-terminated contracts. |
Foreign Currency | Foreign Currency - The functional currency of our locations in the Philippines, India, Sri Lanka, Israel and Hong Kong is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees, Israeli shekels and Hong Kong dollars are translated to U.S. dollars at rates which approximate those in effect on the transaction dates. Monetary assets and all liabilities denominated in foreign currencies at March 31, 2021 and December 31, 2020 are translated at the exchange rate in effect as of those dates. Nonmonetary assets and stockholders’ equity are translated at the appropriate historical rates. Included in direct operating costs were foreign exchange gains (losses) resulting from such transactions of approximately $140,000 and $(77,000) for the three months ended March 31, 2021 and 2020, respectively. 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 Company’s condensed consolidated financial statements. Revenues, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal periods, 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 income (loss). The amount of foreign currency translation adjustment was $21,000 and $718,000 for the three months ended March 31, 2021 and 2020, respectively. |
Derivative Instruments | Derivative Instruments - The Company accounts for derivative transactions in accordance with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 825, “Financial Instruments,” with the corresponding unrealized gain or loss recognized as part of direct operating costs. |
Income Taxes | Income Taxes – Estimated deferred taxes are determined based on the difference between the financial statement and tax basis 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 estimated 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 anticipates that it will be able to realize the estimated deferred tax assets in the future in excess of its net recorded amount, an adjustment to the provision for deferred tax assets would increase income in the period such determination was made. Similarly, in the event that the Company anticipates that it will not be able to realize the estimated deferred tax assets in the future considering future taxable income, an adjustment to the provision for 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 . If such earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, the Company would have to accrue as a liability the applicable amount of foreign jurisdiction withholding taxes associated with such remittances. 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 entities cannot be predicted with certainty, the Company maintains a valuation allowance against all the U.S. and Canadian net 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 income (loss). |
Recent Accounting Pronouncements | Recent Accounting Pronouncements - In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards. The standard eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.The Company adopted the standard on January 1, 2021 and it had no material impact on the Company’s condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements” (“ASU 2016-13”). ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation amount that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” which clarifies ASC 326, “Financial Instruments – Credit Losses” and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments,” which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 is effective for certain smaller reporting companies for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2023 for us if we continue to be classified as a smaller reporting company, with early adoption permitted. We do not expect that the adoption of the new guidance will have a material impact on our condensed consolidated financial statements. |
Correction of Immaterial Errors | Correction of Immaterial Errors – During the preparation of the September 30, 2020 condensed consolidated financial statements, certain historical errors were identified relating to the accounting for capital leases under ASC Topics 840 and 842,both relating to lease accounting. The lease obligations under certain leases were not recorded at their present values at the inception of the leases, resulting in an overstatement of expenses for the three months ended March 31, 2020. The errors were not material, either quantitatively or qualitatively, in any of the reported periods. However, the corrections, if recorded in the three-month period ended September 30, 2020, would have been material to such period. Accordingly, the March 31, 2020 financial statements included in this Form 10-Q are being corrected by revising such financial statements, as follows: · A decrease in expenses of $74,000 for the three months ended March 31, 2020. There was no impact on the loss per share for the three-month period ended March 31, 2020. · A decrease in liabilities of $51,000 as of March 31, 2020. · An increase in total assets of $23,000 as of March 31, 2020. · The impact on cash flows for the three months ended March 31, 2020 was: · An increase in cash flows provided by operating activities of $47,000. · An increase in cash flows used in financing activities of $47,000. The Company evaluated the errors under Staff Accounting Bulletins 99 and 108 and concluded that a restatement of the March 31, 2020 condensed consolidated financial statements is not required. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets | |
Schedule of Carrying Amount of Goodwill | The change in the carrying amount of goodwill for the three months ended March 31, 2021 was as follows (in thousands): Balance as of January 1, 2021 $ 2,150 Foreign currency translation adjustment 7 Balance as of March 31, 2021 $ 2,157 |
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, 2021 $ 3,175 $ 2,228 $ 882 $ 45 $ 3,670 $ 10,000 Foreign currency translation 18 18 2 1 (1) 38 Balance as of March 31, 2021 $ 3,193 $ 2,246 $ 884 $ 46 $ 3,669 $ 10,038 Trademarks Media Developed Customer and Contact technology relationships tradenames Patents Database Total Accumulated amortization: Balance as of January 1, 2021 $ 1,844 $ 1,192 $ 629 $ 29 $ 1,650 $ 5,344 Amortization expense 79 46 14 1 91 231 Foreign currency translation 12 10 1 1 2 26 Balance as of March 31, 2021 $ 1,935 $ 1,248 $ 644 $ 31 $ 1,743 $ 5,601 Net carrying values - March 31, 2021 $ 1,258 $ 998 $ 240 $ 15 $ 1,926 $ 4,437 |
Schedule of estimated amortization expense for intangible assets | As of March 31, 2021, estimated future amortization expense for intangible assets is as follows (in thousands): Year Amortization 2021 $ 701 2022 935 2023 935 2024 831 2025 685 Thereafter 350 $ 4,437 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
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, 2021 and 2020 are summarized in the table below: For the Three Months Ended March 31, 2021 2020 Federal income tax expense at statutory rate 21.0 % 21.0 % Effect of: Tax effects of foreign operations 85.2 242.7 Change in valuation allowance 26.7 (78.5) Foreign operations permanent difference - foreign exchange gains and losses 15.4 144.3 State income tax net of federal benefit 2.4 16.2 Return to provision true up 0.4 (50.6) Withholding tax 0.3 9.3 Foreign rate differential (5.8) (34.7) Effect of stock based compensation (61.3) — Increase (decrease) in unrecognized tax benefits (ASC 740) (114.9) 67.1 Other 8.9 (12.8) Effective tax rate (21.7) % 324.0 % |
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, 2021 (in thousands): Unrecognized tax benefits Balance - January 1, 2021 $ 3,231 Increase for current period tax positions 61 Decrease for prior period tax positions (1,476) Interest accrual 30 Foreign currency remeasurement (4) Balance - March 31, 2021 $ 1,842 |
Stock Options and Restricted _2
Stock Options and Restricted Shares (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Stock Options and Restricted Shares | |
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, 2021 Weighted average fair value of options granted $ 3.33 Risk-free interest rate 0.22%-0.82 % Expected term (years) 2.96-6.0 Expected volatility factor 59.62 % Expected dividends — |
Schedule of Stock Option Activity | A summary of stock option activity under the Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016 (the Plan), as of March 31, 2021, and changes during the three months then ended, are presented below: Weighted - Weighted-Average Number of Average Exercise Remaining Contractual Aggregate Options Price Term (years) Intrinsic Value Outstanding at January 1, 2021 5,906,884 $ 1.61 Granted 360,000 6.40 Exercised (689,616) 2.17 Forfeited/Expired (13,333) 1.38 Outstanding at March 31, 2021 5,563,935 $ 1.86 7.69 $ 24,770,815 Exercisable at March 31, 2021 3,594,434 $ 1.68 7.10 $ 16,621,389 Vested and Expected to Vest at March 31, 2021 5,563,935 $ 1.86 7.69 $ 24,770,815 |
Summary of restricted shares under the Company's Plan | A summary of restricted shares under the Plan as of March 31, 2021 are presented below: Weighted-Average Grant Date Fair Number of Shares Value Unvested at December 31, 2020 50,000 Granted — Vested (25,000) Forfeited/Expired — Unvested at March 31, 2021 25,000 $ 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, 2021 2020 Direct operating costs $ 38 $ 40 Selling and administrative expenses 240 130 Total stock-based compensation $ 278 $ 170 |
Operating Leases (Tables)
Operating Leases (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Operating Leases | |
Schedule of Operating Lease Expense Recognized in Financial Statements | The table below summarizes the amounts recognized in the condensed consolidated financial statements related to operating leases for the periods presented (in thousands): For the Three Months Ended March 31, 2021 2020 Rent expense for long-term operating leases $ 388 $ 443 Rent expense for short-term leases 49 172 Total rent expense $ 437 $ 615 |
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, 2021 (in thousands): Year Amount 2021 $ 1,568 2022 1,476 2023 1,172 2024 1,033 2025 1,049 2026 and thereafter 3,228 Total lease payments 9,526 Less: Interest (2,443) Net present value of lease liabilities $ 7,083 Current portion $ 1,017 Long-term portion 6,066 Total $ 7,083 |
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, 2021 were as follows: Weighted-average lease term remaining 63 months Weighted-average discount rate 8.68 % |
Long-term obligations (Tables)
Long-term obligations (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Long-term obligations | |
Schedule of Total Long-Term Obligations | Total long-term obligations as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands): March 31, December 31, 2021 2020 Pension obligations - accrued pension liability $ 6,015 $ 5,940 Settlement agreement (1) 456 518 Capital lease obligations — 209 Microsoft licenses (2) 743 747 Bank loans payable (3) 580 580 7,794 7,994 Less: Current portion of long-term obligations 2,134 1,712 Totals $ 5,660 $ 6,282 (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. (2) On April 2020, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2023. Pursuant to this agreement, the Company was obligated to pay approximately $0.4 million annually over the term of the agreement. (3) On May 4, 2020, the Company received loan proceeds of $579,700 under the Paycheck Protection Program (“PPP”) which was established as part of the Coronavirus Aid, Relief and Economic Security Act of 2020, as amended. 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. On January 29, 2021, the Company filed its loan forgiveness application for 100% of the approved loan under the PPP. |
Comprehensive loss (Tables)
Comprehensive loss (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Comprehensive loss | |
Schedule of Accumulated Other Comprehensive Loss | The components of accumulated other comprehensive loss as of March 31, 2021 and 2020, and reclassifications out of accumulated other comprehensive loss for the three months then ended, are presented below (in thousands): Foreign Currency Pension Liability Fair Value of Translation Accumutaled Other Adjustment Derivatives Adjustment Comprehensive Loss Balance at January 1, 2021 $ (444) $ — $ (494) $ (938) Other comprehensive loss before reclassifications, net of taxes — — (21) (21) Total other comprehensive loss before reclassifications, net of taxes (444) — (515) (959) Net amount reclassified to earnings 11 — — 11 Balance at March 31, 2021 $ (433) $ — $ (515) $ (948) Foreign Currency Pension Liability Fair Value of Translation Accumutaled Other Adjustment Derivatives Adjustment Comprehensive 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) |
Segment Reporting and Concent_2
Segment Reporting and Concentrations (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
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 for the periods presented were as follows (in thousands): For the Three Months Ended March 31, 2021 2020 Revenues: DDS $ 11,764 $ 10,409 Synodex 1,018 1,282 Agility 3,185 2,839 Total Consolidated $ 15,967 $ 14,530 Income (loss) before provision for income taxes (1) : DDS $ 654 $ 203 Synodex 108 196 Agility (426) (274) Total Consolidated $ 336 $ 125 Income (loss) before provision for income taxes (2) : DDS $ 584 $ 133 Synodex 152 241 Agility (400) (249) Total Consolidated $ 336 $ 125 March 31, 2021 December 31, 2020 Total assets: DDS $ 26,948 $ 27,767 Synodex 129 457 Agility 29,214 29,030 Total Consolidated $ 56,291 $ 57,254 March 31, 2021 December 31, 2020 Goodwill: Agility $ 2,157 $ 2,150 Total $ 2,157 $ 2,150 (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, 2021 2020 United States $ 8,220 $ 6,694 United Kingdom 2,802 2,771 The Netherlands 1,654 1,640 Canada 1,595 1,545 Others - principally Europe 1,696 1,880 Totals $ 15,967 $ 14,530 |
Schedule of Revenue from External Customers based on Client domicile | Long-lived assets as of March 31, 2021 and 2020 by geographic region were comprised of (in thousands): March 31, December 31, 2021 2020 United States $ 3,901 $ 4,045 Foreign countries: Canada 9,160 9,044 United Kingdom 1,703 1,759 Philippines 4,386 4,545 India 833 930 Sri Lanka 279 319 Israel — 1 Total foreign 16,361 16,598 Totals $ 20,262 $ 20,643 |
Income (Loss) Per Share (Tables
Income (Loss) Per Share (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Income (Loss) Per Share | |
Schedule of Earnings Per Share, Basic and Diluted | For the Three Months Ended March 31, 2021 2020 Net income (loss) attributable to Innodata Inc. and Subsidiaries $ 398 $ (291) Weighted average common shares outstanding 25,873 24,401 Dilutive effect of outstanding options 3,579 — Adjusted for dilutive computation 29,452 24,401 |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Derivatives | |
Schedule of effects of foreign currency forward contracts designated as cash flow hedges | The effect of foreign currency forward contracts designated as cash flow hedges on the condensed consolidated statements of operations for the years ended March 31, 2021 and 2020 were as follows (in thousands): For the Three Months Ended March 31, 2021 2020 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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Revenues | $ 15,967,000 | $ 14,530,000 | |
Foreign Currency Transaction Gain (Loss), before Tax | 140,000 | (77,000) | |
Foreign currency translation adjustment, net of taxes | 21,000 | 718,000 | |
Cash and Cash Equivalents, at Carrying Value, Total | 17,296,000 | $ 17,573,000 | |
Deferred Revenue | 2,000,000 | 1,200,000 | |
Capitalized software development costs | |||
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Cost | 7,100,000 | 5,500,000 | |
Capitalized software development cost - work in progress | |||
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Cost | $ 300,000 | $ 1,400,000 | |
Minimum | Capitalized software development costs | |||
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Estimated useful lives | P3Y | ||
Maximum | Capitalized software development costs | |||
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Estimated useful lives | P10Y | ||
Agility [Member] | |||
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Revenues | $ 3,185,000 | 2,839,000 | |
Error corrections | |||
Description of Business and Summary of Significant Accounting Policies [Line Items] | |||
Decrease in expenses | 74,000 | ||
Decrease in liabilities | 51,000 | ||
Increase in total assets | 23,000 | ||
Increase in cash flow from operating activities | 47,000 | ||
Increase in cash flow from financing activities | $ 47,000 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Carrying Amount of Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Goodwill and Intangible Assets | |
Balance | $ 2,150 |
Foreign currency translation | 7 |
Balance | $ 2,157 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Acquisition-Related Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Gross carrying amounts: | ||
Balance | $ 10,000 | |
Foreign currency translation | 38 | |
Balance | 10,038 | |
Accumulated amortization: | ||
Balance | 5,344 | |
Amortization expense | 231 | |
Foreign currency translation | 26 | |
Balance | 5,601 | |
Net carrying values | 4,437 | $ 4,656 |
Developed technology [Member] | ||
Gross carrying amounts: | ||
Balance | 3,175 | |
Foreign currency translation | 18 | |
Balance | 3,193 | |
Accumulated amortization: | ||
Balance | 1,844 | |
Amortization expense | 79 | |
Foreign currency translation | 12 | |
Balance | 1,935 | |
Net carrying values | 1,258 | |
Customer relationships [Member] | ||
Gross carrying amounts: | ||
Balance | 2,228 | |
Foreign currency translation | 18 | |
Balance | 2,246 | |
Accumulated amortization: | ||
Balance | 1,192 | |
Amortization expense | 46 | |
Foreign currency translation | 10 | |
Balance | 1,248 | |
Net carrying values | 998 | |
Trademarks and trade names [Member] | ||
Gross carrying amounts: | ||
Balance | 882 | |
Foreign currency translation | 2 | |
Balance | 884 | |
Accumulated amortization: | ||
Balance | 629 | |
Amortization expense | 14 | |
Foreign currency translation | 1 | |
Balance | 644 | |
Net carrying values | 240 | |
Patents [Member] | ||
Gross carrying amounts: | ||
Balance | 45 | |
Foreign currency translation | 1 | |
Balance | 46 | |
Accumulated amortization: | ||
Balance | 29 | |
Amortization expense | 1 | |
Foreign currency translation | 1 | |
Balance | 31 | |
Net carrying values | 15 | |
Media Contact Database [Member] | ||
Gross carrying amounts: | ||
Balance | 3,670 | |
Foreign currency translation | (1) | |
Balance | 3,669 | |
Accumulated amortization: | ||
Balance | 1,650 | |
Amortization expense | 91 | |
Foreign currency translation | 2 | |
Balance | 1,743 | |
Net carrying values | $ 1,926 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Estimated Amortization Expense (Details) $ in Thousands | Mar. 31, 2021USD ($) |
Goodwill and Intangible Assets | |
2021 | $ 701 |
2022 | 935 |
2023 | 935 |
2024 | 831 |
2025 | 685 |
Thereafter | 350 |
Finite-Lived Intangible Assets, Net | $ 4,437 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Additional Information (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Goodwill and Intangible Assets | |
Amortization expense | $ 231 |
Intangible Assets, Amortization Period [Member] | |
Goodwill and Intangible Assets | |
Amortization expense | $ 200 |
Income Taxes - Tax Rate Reconci
Income Taxes - Tax Rate Reconciliation (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Taxes | ||
Federal income tax expense at statutory rate | 21.00% | 21.00% |
Effect of: | ||
Tax effects of foreign operations | 85.20% | 242.70% |
Change in valuation allowance | 26.70% | (78.50%) |
Foreign operations permanent difference - foreign exchange gains and losses | 15.40% | 144.30% |
State income tax net of federal benefit | 2.40% | 16.20% |
Return to provision true up | 0.40% | (50.60%) |
Withholding tax | 0.30% | 9.30% |
Foreign rate differential | (5.80%) | (34.70%) |
Effect of stock based compensation | (61.30%) | 0.00% |
Increase (decrease) in unrecognized tax benefits (ASC 740) | (114.90%) | 67.10% |
Other | 8.90% | (12.80%) |
Effective tax rate | (21.70%) | 324.00% |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Income Taxes | |
Balance - January 1, 2021 | $ 3,231 |
Increase for current period tax positions | 61 |
Decrease for prior period tax positions | (1,476) |
Interest accrual | 30 |
Foreign currency remeasurement | (4) |
Balance - March 31, 2021 | $ 1,842 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 1 Months Ended | |
Oct. 31, 2016 | Sep. 30, 2015 | |
Income Taxes [Line Items] | ||
Subsidiary Revenue | $ 64,000,000 | |
Reversal of Service Tax Refund | $ 160,000 | |
Service Tax Credit Receivable | $ 1,000,000 | |
Maximum | ||
Income Taxes [Line Items] | ||
Percentage for Subsidiary Service Tax | 15.00% | |
Minimum | ||
Income Taxes [Line Items] | ||
Percentage for Subsidiary Service Tax | 12.36% |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Commitments and Contingencies | |
Estimated Litigation Liability | $ 6,800,000 |
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 | $ 350,000,000 |
Stock Options and Restricted _3
Stock Options and Restricted Shares - Summary of Stock Option Activity (Details) - Employee Stock Option [Member] | 3 Months Ended |
Mar. 31, 2021USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of Options, Outstanding at January 1, 2021, (in shares) | shares | 5,906,884 |
Number of Options, Granted (in shares) | shares | 360,000 |
Number of Options, Exercised (in shares) | shares | (689,616) |
Number of Options, Forfeited/Expired (in shares) | shares | (13,333) |
Number of Options, Outstanding at March 31, 2021, (in shares) | shares | 5,563,935 |
Number of Options Exercisable at March 31, 2021 (in shares) | shares | 3,594,434 |
Number of Options, Vested and Expected to Vest at March 31, 2021 (in shares) | shares | 5,563,935 |
Weighted Average Exercise Price Outstanding (in dollars per shares) | $ / shares | $ 1.61 |
Weighted Average Exercise Price Granted (in dollars per shares) | $ / shares | 6.40 |
Weighted Average Exercise Price Exercised (in dollars per shares) | $ / shares | 2.17 |
Weighted Average Exercise Price Forfeited/Expired (in dollars per shares) | $ / shares | 1.38 |
Weighted Average Exercise Price Outstanding (in dollars per shares) | $ / shares | 1.86 |
Weighted Average Exercise Price Exercisable at December 31, 2020 (in dollars per shares) | $ / shares | 1.68 |
Weighted Average Exercise Price Vested and Expected to Vest at December 31, 2020 (in dollars per shares) | $ / shares | $ 1.86 |
Weighted Average Remaining Contractual Term Outstanding (in years) | 7 years 8 months 9 days |
Weighted Average Remaining Contractual Term Exercisable at December 31, 2020 (in years) | 7 years 1 month 6 days |
Weighted Average Remaining Contractual Term Vested and Expected to Vest at December 31, 2020 (in years) | 7 years 8 months 9 days |
Aggregate Intrinsic Value, Outstanding at December 31, | $ | $ 24,770,815 |
Aggregate Intrinsic Value, Exercisable at December 31, 2020 | $ | 16,621,389 |
Aggregate Intrinsic Value, Vested and Expected to Vest at December 31, 2020 | $ | $ 24,770,815 |
Stock Options and Restricted _4
Stock Options and Restricted Shares - Weighted Average Fair Values and Assumptions (Details) | 3 Months Ended |
Mar. 31, 2021$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average fair value of options granted (in dollars per share) | $ 3.33 |
Expected volatility factor | 59.62% |
Expected dividends | 0.00% |
Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 0.22% |
Expected life (years) | 2 years 11 months 16 days |
Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 0.82% |
Expected life (years) | 6 years |
Stock Options and Restricted _5
Stock Options and Restricted Shares - Summary of Restricted Shares (Details) | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Stock Options and Restricted Shares | |
Number of Shares, Unvested at December 31, 2020 | 50,000 |
Number of Shares, Granted | 0 |
Number of Shares, Vested | (25,000) |
Number of Shares, Forfeited/Expired | 0 |
Number of Shares, Unvested at March 31, 2021 | 25,000 |
Weighted-Average Grant Date Fair Value, Granted | $ / shares | $ 0 |
Weighted-Average Grant Date Fair Value, Outstanding | $ / shares | $ 1.38 |
Stock Options and Restricted _6
Stock Options and Restricted Shares - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Stock Options and Restricted Shares | ||
Direct operating costs | $ 38 | $ 40 |
Selling and administrative expenses | 240 | 130 |
Total stock-based compensation | $ 278 | $ 170 |
Stock Options and Restricted _7
Stock Options and Restricted Shares - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2021USD ($)shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Aggregate value of options exercised | $ | $ 609,000 |
Number of Shares, Vested | shares | 25,000 |
Surrender of exercised stock options | shares | 6,597 |
Employee Service Share-Based Compensation, Nonvested Awards, Total Compensation Cost Not Yet Recognized | $ | $ 2,000,000 |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 26 months |
Employee Stock Option [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Aggregate value of options exercised | $ | $ 1,497,382 |
Share-based Compensation Arrangements by Share-based Payment Award, Surrender of Exercised Options | shares | 186,816 |
Operating Leases - Operating Le
Operating Leases - Operating Leases Amount Recognized (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Operating Leases, Rent Expense | $ 437 | $ 615 |
Long Term Operating Lease [Member] | ||
Operating Leases, Rent Expense | 388 | 443 |
Short Term Operating Lease [Member] | ||
Operating Leases, Rent Expense | $ 49 | $ 172 |
Operating Leases - Net Present
Operating Leases - Net Present Value of Operating Lease Liability (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Operating Leases | ||
2021 | $ 1,568 | |
2022 | 1,476 | |
2023 | 1,172 | |
2024 | 1,033 | |
2025 | 1,049 | |
2026 and thereafter | 3,228 | |
Total lease payments | 9,526 | |
Less: Interest | (2,443) | |
Net present value of lease liabilities | 7,083 | |
Current portion | 1,017 | $ 990 |
Long- term portion | 6,066 | $ 6,332 |
Total | $ 7,083 |
Operating Leases - Weighted Ave
Operating Leases - Weighted Average Remaining Lease Terms (Details) | Mar. 31, 2021 |
Operating Leases | |
Weighted-average lease term remaining | 63 months |
Weighted-average discount rate | 8.68% |
Operating Leases - Additional I
Operating Leases - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2021 | |
Minimum | |
Lessee, Operating Lease, Term of Contract | 2 years |
Percentage of Rental Escalations | 1.75% |
Maximum | |
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, 2021 | Dec. 31, 2020 |
Pension obligations | ||
Pension obligations - accrued pension liability | $ 6,015 | $ 5,940 |
Settlement agreement | 456 | 518 |
Capital lease obligations | 0 | 209 |
Microsoft licenses | 743 | 747 |
Bank loans payable | 580 | 580 |
Long-term Debt | 7,794 | 7,994 |
Less: Current portion of long-term obligations | 2,134 | 1,712 |
Totals | $ 5,660 | $ 6,282 |
Long-term obligations - Additio
Long-term obligations - Additional Information (Details) - USD ($) | May 04, 2020 | Mar. 31, 2021 | Jan. 29, 2021 |
Vendor Agreement [Member] | |||
Debt Instrument [Line Items] | |||
Cost of Goods and Services Sold | $ 400,000 | ||
Paycheck Protection Program Loan [Member] | |||
Debt Instrument [Line Items] | |||
Proceeds from Issuance of Debt | $ 579,700 | ||
Debt Instrument, Interest Rate, Stated Percentage | 100.00% |
Comprehensive loss - Reclassifi
Comprehensive loss - Reclassifications out of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | $ 29,640 | $ 26,309 |
Balance | 30,152 | 25,313 |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | (938) | (920) |
Other comprehensive loss before reclassifications, net of taxes | (21) | (884) |
Total other comprehensive loss before reclassifications, net of taxes | (959) | (1,804) |
Net amount reclassified to earnings | 11 | 9 |
Balance | (948) | (1,795) |
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | (444) | (53) |
Total other comprehensive loss before reclassifications, net of taxes | (444) | (53) |
Net amount reclassified to earnings | 11 | 14 |
Balance | (433) | (39) |
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Balance | 33 | |
Other comprehensive loss before reclassifications, net of taxes | (166) | |
Total other comprehensive 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 | (494) | (900) |
Other comprehensive loss before reclassifications, net of taxes | (21) | (718) |
Total other comprehensive loss before reclassifications, net of taxes | (515) | (1,618) |
Balance | $ (515) | $ (1,618) |
Segment Reporting and Concent_3
Segment Reporting and Concentrations (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Segment reporting information | |||
Revenues | $ 15,967 | $ 14,530 | |
Income (loss) before provision for income taxes | 336 | 125 | |
Total assets | 56,291 | $ 57,254 | |
Goodwill | 2,157 | 2,150 | |
Before Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | 336 | 125 | |
After Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | 336 | 125 | |
DDS [Member] | |||
Segment reporting information | |||
Revenues | 11,764 | 10,409 | |
Total assets | 26,948 | 27,767 | |
DDS [Member] | Before Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | 654 | 203 | |
DDS [Member] | After Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | 584 | 133 | |
Synodex [Member] | |||
Segment reporting information | |||
Revenues | 1,018 | 1,282 | |
Total assets | 129 | 457 | |
Synodex [Member] | Before Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | 108 | 196 | |
Synodex [Member] | After Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | 152 | 241 | |
Agility [Member] | |||
Segment reporting information | |||
Revenues | 3,185 | 2,839 | |
Total assets | 29,214 | 29,030 | |
Goodwill | 2,157 | $ 2,150 | |
Agility [Member] | Before Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | (426) | (274) | |
Agility [Member] | After Intersegment Eliminations [Member] | |||
Segment reporting information | |||
Income (loss) before provision for income taxes | $ (400) | $ (249) |
Segment Reporting and Concent_4
Segment Reporting and Concentrations - Long-lived assets (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | $ 20,262 | $ 20,643 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 3,901 | 4,045 |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 9,160 | 9,044 |
United Kingdom | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 1,703 | 1,759 |
Philippines | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 4,386 | 4,545 |
India | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 833 | 930 |
Sri Lanka | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 279 | 319 |
Israel | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | 1 | |
Total Foreign | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived assets | $ 16,361 | $ 16,598 |
Segment Reporting and Concent_5
Segment Reporting and Concentrations - Revenues by geographic region (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 15,967 | $ 14,530 |
Other - principally Europe | ||
Segment Reporting Information [Line Items] | ||
Revenues | 1,696 | 1,880 |
United States | ||
Segment Reporting Information [Line Items] | ||
Revenues | 8,220 | 6,694 |
United Kingdom | ||
Segment Reporting Information [Line Items] | ||
Revenues | 2,802 | 2,771 |
The Netherlands | ||
Segment Reporting Information [Line Items] | ||
Revenues | 1,654 | 1,640 |
Canada | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 1,595 | $ 1,545 |
Segment Reporting and Concent_6
Segment Reporting and Concentrations - Additional information (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021segmentclient | Mar. 31, 2020client | Dec. 31, 2020client | |
Segment Reporting Information [Line Items] | |||
Number of Reportable Segments | segment | 3 | ||
Foreign Customer [Member] | Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Concentration Risk, Percentage | 49.00% | 54.00% | |
Foreign Customer [Member] | Accounts receivable | |||
Segment Reporting Information [Line Items] | |||
Concentration Risk, Percentage | 48.00% | 55.00% | |
One Client [Member] | Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 1 | 1 | |
Concentration Risk, Percentage | 12.00% | 14.00% | |
Four clients [Member] | Accounts receivable | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 4 | ||
Concentration Risk, Percentage | 45.00% | ||
Three Clients [Member] | Accounts receivable | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 3 | ||
Concentration Risk, Percentage | 36.00% | ||
Client [Member] | Sales Revenue, Net [Member] | |||
Segment Reporting Information [Line Items] | |||
Number of clients | 0 | ||
Concentration Risk, Percentage | 10.00% |
Income (Loss) Per Share (Detail
Income (Loss) Per Share (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income (Loss) Per Share | ||
Net income (loss) attributable to Innodata Inc. and Subsidiaries | $ 398 | $ (291) |
Weighted average common shares outstanding | 25,873 | 24,401 |
Dilutive effect of outstanding options | 3,579 | 0 |
Adjusted for dilutive computation | 29,452 | 24,401 |
Income (Loss) Per Share - Addit
Income (Loss) Per Share - Additional information (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
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 | 0.3 | 6.3 |
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, 2021 | Dec. 31, 2020 |
Derivatives | ||
Derivative, Notional Amount | $ 5.8 | $ 6.9 |