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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2025

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35774

INNODATA INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3475943
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

55 Challenger Road	07660
Ridgefield Park, New Jersey	(Zip Code)
(Address of principal executive offices)

(201) 371-8000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	INOD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☑ Smaller reporting company ☑ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of outstanding shares of the registrant’s common stock, $0.01 par value per share, as of October 31, 2025 was 31,860,951.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

For the Quarter Ended September 30, 2025

INDEX

	Part I – Financial Information
		Page No.
Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024	2
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended September 30, 2025 and 2024	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2025 and 2024	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2025 and 2024	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42

	Part II – Other Information

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures		44

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	September 30,		December 31,
	2025		2024
ASSETS
Current assets:
Cash and cash equivalents	$	73,859	$	46,897
Accounts receivable, net of allowance for credit losses		39,440		28,013
Prepaid expenses and other current assets		6,478		6,090
Total current assets		119,777		81,000
Property and equipment, net		7,143		4,101
Right-of-use-asset, net		4,332		4,238
Other assets		1,524		1,267
Deferred income taxes, net		4,188		7,492
Intangibles, net		13,885		13,353
Goodwill		2,067		1,998
Total assets	$	152,916	$	113,449

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,389	$	4,554
Accrued expenses		12,297		4,891
Accrued salaries, wages and related benefits		15,262		13,836
Deferred revenues		7,025		8,010
Income and other taxes		3,205		5,695
Long-term obligations - current portion		1,221		1,643
Operating lease liability - current portion		1,122		877
Total current liabilities		44,521		39,506
Deferred income taxes, net		40		32
Long-term obligations, net of current portion		7,560		6,744
Operating lease liability, net of current portion		3,555		3,778
Total liabilities		55,676		50,060
Commitments and contingencies		-		-

STOCKHOLDERS’ EQUITY:
Serial preferred stock; 4,998,000 shares authorized, none issued and outstanding		-		-
Common stock, $.01 par value; 75,000,000 shares authorized; 35,043,000 shares issued and 31,859,000 outstanding at September 30, 2025 and 34,484,000 shares issued and 31,300,000 outstanding at December 31, 2024		351		345
Additional paid-in capital		62,899		53,085
Retained earnings		42,325		18,977
Accumulated other comprehensive loss		(1,787)		(2,470)
		103,788		69,937
Less: treasury stock, 3,184,000 shares at September 30, 2025 and December 31, 2024, at cost		(6,465)		(6,465)
Stockholders’ equity Innodata Inc. and subsidiaries		97,323		63,472
Non-controlling interests		(83)		(83)
Total Stockholders’ equity		97,240		63,389
Total liabilities and stockholders’ equity	$	152,916	$	113,449

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended
	September 30,
	2025		2024
Revenues	$	62,550	$	52,224
Direct operating costs		37,046		30,893
Selling and administrative expenses		13,745		9,910
Interest income, net		(420)		(26)
		50,371		40,777
Income before provision for income taxes		12,179		11,447

Provision for income taxes		3,837		(5,944)
Consolidated net income		8,342		17,391
Income attributable to non-controlling interests		-		2
Net Income attributable to Innodata Inc. and Subsidiaries	$	8,342	$	17,389

Income per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	0.26	$	0.60
Diluted	$	0.24	$	0.51

Weighted average shares outstanding:
Basic		31,848		28,994
Diluted		35,266		34,007

Comprehensive Income:
Consolidated net income	$	8,342	$	17,391
Pension liability adjustment, net of taxes		(1)		(1)
Foreign currency translation adjustment		(178)		245
Change in fair value of derivatives, net of taxes		(315)		221
Other comprehensive income (loss)		(494)		465
Total comprehensive income		7,848		17,856
Comprehensive income attributed to non-controlling interest		-		2
Comprehensive income attributable to Innodata Inc. and Subsidiaries	$	7,848	$	17,854

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share amounts)


	Nine Months Ended
	September 30,
	2025		2024
Revenues	$	179,287	$	111,281
Direct operating costs		107,508		70,964
Selling and administrative expenses		42,837		27,235
Interest income, net		(1,124)		(55)
		149,221		98,144
Income before provision for income taxes		30,066		13,137
Provision for income taxes		6,718		(5,235)
Consolidated net income		23,348		18,372
Income attributable to non-controlling interests		-		8
Net Income attributable to Innodata Inc. and Subsidiaries	$	23,348	$	18,364

Income per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	0.74	$	0.64
Diluted	$	0.67	$	0.55

Weighted average shares outstanding:
Basic		31,690		28,873
Diluted		34,996		33,297


Comprehensive Income:
Consolidated net income	$	23,348	$	18,372
Pension liability adjustment, net of taxes		(37)		(2)
Foreign currency translation adjustment		513		37
Change in fair value of derivatives, net of taxes		207		13
Other comprehensive income		683		48
Total comprehensive income		24,031		18,420
Comprehensive income attributed to non-controlling interest		-		8
Comprehensive income attributable to Innodata Inc. and Subsidiaries	$	24,031	$	18,412

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2025		2024
Cash flows from operating activities:
Consolidated net income	$	23,348	$	18,372
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Stock-based compensation		8,309		2,881
Depreciation and amortization		4,913		4,219
Deferred income taxes		3,201		(6,153)
Pension cost		984		948
Changes in operating assets and liabilities:
Accounts receivable		(11,167)		(8,834)
Prepaid expenses and other current assets		(299)		(1,222)
Other assets		(248)		673
Accounts payable and accrued expenses		6,948		1,892
Deferred revenues		(985)		2,977
Accrued salaries, wages and related benefits		1,397		1,822
Income and other taxes		(2,530)		109
Net cash provided by operating activities		33,871		17,684

Cash flows from investing activities:
Capital expenditures		(8,286)		(5,522)
Net cash used in investing activities		(8,286)		(5,522)

Cash flows from financing activities:
Proceeds from exercise of stock options		1,548		810
Withholding taxes on net settlement of restricted stock units		(37)		(97)
Payment of long-term obligations		(369)		(516)
Net cash provided by financing activities		1,142		197

Effect of exchange rate changes on cash and cash equivalents		235		199

Net increase in cash and cash equivalents		26,962		12,558

Cash and cash equivalents, beginning of period		46,897		13,806
Cash and cash equivalents, end of period	$	73,859	$	26,364

Supplemental disclosures of cash flow information:
Shares withheld for withholding taxes on net settlement for restricted stock	$	37	$	97
Cash paid for income taxes	$	3,614	$	765
Cash paid for operating leases	$	1,102	$	1,085
Cash paid for interest	$	133	$	190

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(Unaudited)

(In thousands)


								Accumulated
				Additional				Other					Non-
	Common Stock			Paid-in		Retained		Comprehensive		Treasury Stock			Controlling
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Interest		Total
January 1, 2025	34,484	$	345	$	53,085	$	18,977	$	(2,470)	(3,184)	$	(6,465)	$	(83)	$	63,389
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		7,787		-	-		-		-		7,787
Stock-based compensation	-		-		2,881		-		-	-		-		-		2,881
Stock option exercises	261		2		961		-		-	-		-		-		963
Issuance of restricted stock units	184		2		(2)		-		-	-		-		-		-
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		-		(1)
Foreign currency translation adjustment	-		-		-		-		109	-		-		-		109
Change in fair value of derivatives, net of taxes	-		-		-		-		274	-		-		-		274
March 31, 2025	34,929	$	349	$	56,925	$	26,764	$	(2,088)	(3,184)	$	(6,465)	$	(83)	$	75,402
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		7,219		-	-		-		-		7,219
Stock-based compensation	-		-		2,721		-		-	-		-		-		2,721
Stock option exercises	92		1		504		-		-	-		-		-		505
Issuance of restricted stock units	8		-		-		-		-	-		-		-		-
Pension liability adjustments, net of taxes	-		-		-		-		(35)	-		-		-		(35)
Foreign currency translation adjustment	-		-		-		-		582	-		-		-		582
Change in fair value of derivatives, net of taxes	-		-		-		-		248	-		-		-		248
June 30, 2025	35,029	$	350	$	60,150	$	33,983	$	(1,293)	(3,184)	$	(6,465)	$	(83)	$	86,642
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		8,342		-	-		-		-		8,342
Stock-based compensation	-		-		2,707		-		-	-		-		-		2,707
Stock option exercises	13		1		79		-		-	-		-		-		80
Issuance of restricted stock units	1		-		-		-		-	-		-		-		-
Shares withheld for restricted stock unit net settlement	-		-		(37)		-		-	-		-		-		(37)
Redemption of non-controlling interest	-		-		-		-		-	-		-		-		-
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		-		(1)
Foreign currency translation adjustment	-		-		-		-		(178)	-		-		-		(178)
Change in fair value of derivatives, net of taxes	-		-		-		-		(315)	-		-		-		(315)
September 30, 2025	35,043	$	351	$	62,899	$	42,325	$	(1,787)	(3,184)	$	(6,465)	$	(83)	$	97,240

January 1, 2024	31,937	$	320	$	43,152	$	(9,683)	$	(1,621)	(3,184)	$	(6,465)	$	(708)	$	24,995
Net income attributable to Innodata Inc. and Subsidiaries	-		-		-		989		-	-		-		-		989
Income attributable to non-controlling interests	-		-		-		-		-	-		-		1		1
Stock-based compensation	-		-		1,034		-		-	-		-		-		1,034
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		-		(1)
Foreign currency translation adjustment	-		-		-		-		(130)	-		-		-		(130)
Change in fair value of derivatives, net of taxes	-		-		-		-		(34)	-		-		-		(34)
March 31, 2024	31,937	$	320	$	44,186	$	(8,694)	$	(1,786)	(3,184)	$	(6,465)	$	(707)	$	26,854
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(14)		-	-		-		-		(14)
Stock-based compensation	-		-		992		-		-	-		-		-		992
Income attributable to non-controlling interests	-		-		-		-		-	-		-		5		5
Stock option exercises	235		2		781		-		-	-		-		-		783
Shares withheld for restricted stock unit net settlement	-		-		(97)		-		-	-		-		-		(97)
Pension liability adjustments, net of taxes	-		-		-		-		-	-		-		-		-
Foreign currency translation adjustment	-		-		-		-		(78)	-		-		-		(78)
Change in fair value of derivatives, net of taxes	-		-		-		-		(174)	-		-		-		(174)
June 30, 2024	32,172	$	322	$	45,862	$	(8,708)	$	(2,038)	(3,184)	$	(6,465)	$	(702)	$	28,271
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		17,389		-	-		-		-		17,389
Stock-based compensation	-		-		855		-		-	-		-		-		855
Stock option exercises	12		-		27		-		-	-		-		-		27
Income attributable to non-controlling interests	-		-		-		-		-	-		-		2		2
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		-		(1)
Foreign currency translation adjustment	-		-		-		-		245	-		-		-		245
Change in fair value of derivatives, net of taxes	-		-		-		-		221	-		-		-		221
September 30, 2024	32,184	$	322	$	46,744	$	8,681	$	(1,573)	(3,184)	$	(6,465)	$	(700)	$	47,009

See notes to Condensed Consolidated Financial Statements.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Summary of Significant Accounting Policies and Estimates

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”) as of September 30, 2025 and December 31, 2024, the results of its operations and comprehensive income for the three and nine months ended September 30, 2025 and 2024, cash flows for the nine months ended September 30, 2025 and 2024, and stockholders’ equity for the three and nine months ended September 30, 2025 and 2024. 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 Securities and Exchange Commission (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, 2024. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the notes to the consolidated financial statements for the year ended December 31, 2024.

Principles of Consolidation - The condensed consolidated financial statements include the accounts of Innodata Inc. and its wholly owned subsidiaries. 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. Actual results could differ from those estimates. Significant estimates include those related to the allowance for credit losses and allowance for billing adjustments, useful life of long-lived assets, useful life of intangible assets, impairment of goodwill and intangible assets, valuation of deferred tax assets, valuation of stock-based compensation, pension benefit plan assumptions, litigation accruals and estimated accruals for various tax exposures.

Concentration of Credit Risk - The Company maintains its cash with highly rated financial institutions, located in the United States and in foreign locations where the Company has its operations. At September 30, 2025, the Company had cash and cash equivalents of $73.9 million, of which $20.7 million was held by its foreign subsidiaries and $53.2 million was held in the United States. To the extent that such cash exceeds the maximum insurance levels, the Company is uninsured. The Company has not experienced any losses in such accounts.

Accounts Receivable - Accounts receivable is generally recorded at the invoiced amounts, net of an allowance for expected losses and allowance for billing adjustments. The Company establishes credit terms for new customers based upon management’s review of their credit information and project terms, and performs ongoing credit evaluations of its customers, adjusting credit terms when management believes appropriate based upon payment history and an assessment of the customer’s current creditworthiness.

The Company records an allowance for credit losses for estimated losses resulting from the failure of its customers to make the required payments and an allowance for billing adjustments relating to quality issues on delivered services, service penalties, discounts and price adjustments. The allowance for credit losses is based on a review of specifically identified accounts and an overall aging analysis applied to accounts pooled based on similar risk characteristics. Judgments are made with respect to the collectability of accounts receivable within each pool based on historical experience, current payment practices, and current economic trends based on our expectations over the expected life of the receivables, generally ninety days or less. Actual credit losses could differ from those estimates.

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.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For the Digital Data Solutions 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. Revenue from agreements billed on a time-and-materials basis is recognized as services are performed. Revenue from fixed-fee agreements, which is not significant to overall revenues, is 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. 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. Revenue from reseller agreements is recognized at the gross amount received for the goods in accordance with the Company functioning as a principal due to the Company 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.

Revenue includes reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs.

Revenue associated with the services provided in one period and billed in a subsequent period is commonly referred to as unbilled revenues and is included under Accounts receivable.

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.

Contract acquisition costs, which are included in prepaid expenses and other current assets, are amortized over the term of a subscription agreement or contract that normally has a duration of 12 months or less. The Company reviews these prepaid acquisition costs on a periodic basis to determine the need to adjust the carrying values for early terminated contracts. Included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets are contract acquisition costs amounting to $1.0 million and $1.1 million as of September 30, 2025 and December 31, 2024, respectively. These acquisition costs relate to our Agility segment and are amortized over the term of the subscription agreement.

Foreign Currency Translation - The functional currency of the Company’s subsidiaries in the Philippines, India, Sri Lanka, Israel, Hong Kong, the United Kingdom and Canada (other than the Agility subsidiaries) is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees, Israeli shekels, United Kingdom Pound Sterling and Canadian 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 on September 30, 2025 and December 31, 2024 are translated at the exchange rate in effect as of those dates. Non-monetary 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 $(0.3) million and $0.5 million for the three months ended September 30, 2025 and 2024, and $0.1 million and $0.2 million for the nine months ended September 30, 2025 and 2024, respectively.

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The functional currency for the Company’s subsidiary in Germany is the Euro. The functional currencies for the Company’s Agility subsidiaries in the United Kingdom and Canada are the Pound Sterling and the Canadian dollar, respectively. The financial statements of these subsidiaries are prepared in their 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. Income, expenses, and cash flows are translated at weighted-average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income or 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).

Derivative Instruments - The Company accounts for derivative transactions in accordance with the FASB’s Accounting Standards Codification (“ASC”) Topic 825, “Financial Instruments”. For derivative instruments that are designated and qualify as cash flow hedges, the entire change in fair value of the hedging instrument is recorded in other comprehensive income (loss). When the amounts recorded in other comprehensive income (loss) are reclassified to earnings, they are included as part of direct operating costs. For derivative instruments that are not designated as hedges, any change in fair value is recorded directly in earnings as part of direct operating costs.

Capitalized Developed Software - 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 third-party development costs and are amortized using the straight-line method over the estimated useful life of the capitalized developed software, which generally ranges from three to ten years. All other research and maintenance costs are expensed as incurred. Capitalized developed software in progress was $3.6 million for each of the periods ended September 30, 2025 and December 31, 2024. The cumulative completed capitalized developed software was $22.5 million and $19.8 million as of September 30, 2025 and December 31, 2024, respectively.

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 deferred tax assets of subsidiaries in Canada and Germany will be realizable or not.

The Company performed an assessment for one of its Canadian subsidiaries as of March 31, 2025 and the assessment yielded positive evidence enabling the release of the valuation allowance for the Canadian deferred tax assets of the subsidiary under “ASC Topic 740-30-22 – Accounting for Income Taxes”.

The Company performed an assessment for its German subsidiary as of June 30, 2025 and the assessment yielded positive evidence enabling the release of the valuation allowance for the German deferred tax assets of the subsidiary under “ASC Topic 740 - 30 - 22 - Accounting for Income Taxes”.

As the expectation of future taxable income of the second Canadian subsidiary cannot be predicted with reasonable accuracy, the Company continues to maintain a valuation allowance against the deferred tax assets of this subsidiary.

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.

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Deferred Revenue - Deferred revenue represents payments received from customers in advance of providing services and amounts deferred if conditions for revenue recognition have not been met. The Company expects to recognize substantially all of these performance obligations over the next 12 months. The table below summarizes the deferred revenue balances as of September 30, 2025 and December 31, 2024 (in thousands):


	September 30,		December 31,
	2025		2024
Deferred revenues	$	7,025	$	8,010

The table below provides information about contract liabilities (deferred revenue) and the changes in the balances for the three and nine months ended as of September 30, 2025 and 2024 were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Balance at the beginning of period	$	6,485	$	4,770	$	8,010	$	3,523
Net deferred revenue in the period		8,481		9,673		21,056		24,989
Revenue recognized		(7,439)		(8,151)		(22,047)		(22,108)
Currency translations and other adjustments		(502)		208		6		96
Balance at the end of period	$	7,025	$	6,500	$	7,025	$	6,500

Recently Issued Accounting Pronouncements Not Yet Adopted - On December 14, 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The effective date of this ASU is for fiscal years beginning after December 15, 2024 and interim periods beginning after December 15, 2025. The adoption of ASU 2023-09 will enhance quantitative and qualitative disclosures related to rate reconciliation of significant components and income tax paid. The Company does not anticipate any material impact from the adoption of this new standard.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), fourth amendment via ASU 2025-01: Disaggregation of Income Statement Expenses”. ASU No. 2024-03 does not change or remove existing expense disclosure requirements but requires disaggregated disclosures about certain expense categories and captions, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. ASU No. 2024-03 will be effective for the Company beginning in fiscal year 2027, and for interim financial reporting beginning in the first quarter of fiscal year 2028. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the Company’s disclosures within the consolidated financial statements.

In July 2025, the FASB issued ASU 2025 - 05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” ASU 2025 - 05 provides entities with a practical expedient related to developing reasonable and supportable forecasts as part of estimating expected credit losses, in which entities may elect to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU No. 2025 - 05 will be effective for the Company beginning in fiscal year 2027. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the Company’s disclosures within the consolidated financial statements.

In September 2025, the FASB issued ASU 2025 - 06, Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350 - 40): Targeted Improvements to the Accounting for Internal - Use Software. ASU 2025 - 06 modernizes the accounting for internal - use software costs by increasing the operability of the recognition guidance considering different methods of software development. ASU 2025 - 06, which can be applied prospectively, retrospectively, or with a modified transition approach, is effective for the Company for annual reporting as well as interim period reporting beginning in fiscal year 2029. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the Company’s disclosures within the consolidated financial statements.

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2.Accounts Receivable

Accounts receivable consists of the following (in thousands):


	September 30,		December 31,
	2025		2024
Gross Accounts receivable	$	41,635	$	29,772
Allowance for credit losses		(1,182)		(1,256)
Allowance for billing adjustments		(976)		(503)
Allowance for volume discounts		(37)		-
Accounts receivable, net	$	39,440	$	28,013

Activity in the allowance for the credit losses for the three and nine months ended September 30, 2025 and 2024 was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Balance at beginning of period	$	1,274	$	1,081	$	1,256	$	992
Additions charged to expense		31		(18)		110		88
Write-offs against allowance		(118)		(128)		(189)		(145)
Foreign currency translation adjustment		(5)		7		5		7
Balance at end of period	$	1,182	$	942	$	1,182	$	942

3.Goodwill and Intangible Assets

Goodwill

As of September 30, 2025, the Company performed its annual goodwill impairment analysis on one of its reporting units, the Agility segment. It involved a quantitative goodwill impairment test and estimated the fair value based on a combination of the income approach (estimates of future discounted cash flows) and the market approach (market multiples for similar companies) using unobservable inputs (Level 3). The income approach uses a discounted cash flow (“DCF”) method that utilizes the present value of cash flows to estimate the segment’s fair value. The future cash flows of the segment were projected based on the Company’s estimates of future revenues, operating income, and other factors such as working capital and capital expenditures. As part of the DCF analysis, the Company projected revenue and operating profits and assumed long - term revenue growth rates in the terminal year. The market approach utilizes multiples of revenues and earnings before interest expense, taxes, depreciation, and amortization (“EBITDA”) to estimate the segment’s fair value. The market multiples used for the segment were based on a group of comparable companies’ market multiples applied to the Company’s revenue. The Company concluded that there is no impairment of goodwill.

The change in the carrying amount of goodwill for the nine months ended September 30, 2025 was as follows (in thousands):


Balance - January 1, 2025	$	1,998
Foreign currency translation adjustment		69
Balance - September 30, 2025	$	2,067

The fair value measurement of goodwill of the Agility segment was conducted on September 30, 2025 and 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 and the market multiple approach using comparable entities to further validate the carrying values. 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. The carrying value of Goodwill was $2.1 million and $2.0 million for the periods ended September 30, 2025 and December 31, 2024.

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Intangibles

Information regarding the Company acquired intangible assets and capitalized developed software was as follows (in thousands):


	September 30, 2025
	Gross				Foreign Currency		Net
	Carrying		Accumulated		Translation		Carrying
	Value		Amortization		Adjustment		Value
Acquired Intangible Assets
Developed technology	$	2,881	$	(2,810)	$	3	$	74
Customer relationships		1,965		(1,832)		8		141
Trademarks and tradenames		840		(828)		1		13
Patents		40		(40)		-		-
Media Contact Database		3,528		(3,268)		16		276
Total Acquired Intangible Assets	$	9,254	$	(8,778)	$	28	$	504

Capitalized Developed Software
Capitalized Developed Software	$	22,493	$	(12,849)	$	177	$	9,821
Capitalized Developed Software - in Progress		3,553		-		7		3,560
Total Capitalized Developed Software	$	26,046	$	(12,849)	$	184	$	13,381

Total	$	35,300	$	(21,627)	$	212	$	13,885


	December 31, 2024
	Gross				Foreign Currency		Net
	Carrying		Accumulated		Translation		Carrying
	Value		Amortization		Adjustment		Value
Acquired Intangible Assets
Developed technology	$	3,060	$	(2,911)	$	(3)	$	146
Customer relationships		2,144		(1,856)		(29)		259
Trademarks and tradenames		862		(826)		-		36
Patents		44		(44)		-		-
Media Contact Database		3,546		(3,016)		(1)		529
Total Acquired Intangible Assets	$	9,656	$	(8,653)	$	(33)	$	970

Capitalized Developed Software
Capitalized Developed Software	$	19,811	$	(10,507)	$	(463)	$	8,841
Capitalized Developed Software - in Progress		3,552		-		(10)		3,542
Total Capitalized Developed Software	$	23,363	$	(10,507)	$	(473)	$	12,383

Total	$	33,019	$	(19,160)	$	(506)	$	13,353

Amortization expense relating to acquired intangible assets was $0.2 million for each of the three-month periods ended September 30, 2025 and 2024. Amortization expense relating to acquired intangible assets was $0.6 million for each of the nine-month periods ended September 30, 2025 and 2024.

Amortization expense relating to capitalized developed software was $1.0 million for each of the three-month periods ended September 30, 2025 and 2024. Amortization expense relating to capitalized developed software was $2.9 million and $2.5 million for the nine months ended September 30, 2025 and 2024, respectively.

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As of September 30, 2025, estimated future amortization expense for intangible assets was as follows (in thousands):


Year	Amortization
Remaining for 2025	$	1,575
2026		5,359
2027		3,895
2028		2,298
2029		516
Thereafter		242
	$	13,885

4.Income Taxes

For the nine months ended September 30, 2025, the Company recorded an income tax provision of approximately $6.7 million. The provision primarily reflects Federal and State income tax expense on U.S. operations, the tax impact of IRS section 162(m) adjustments, deemed interest provision, and income tax expense attributable to the Company’s subsidiaries in foreign jurisdictions in accordance with applicable local tax regulations. The tax provision was partially offset by the favorable effect of stock-based compensation, the favorable impact of withholding taxes and the release of valuation allowances on deferred tax assets of one of the Company’s Canadian and the Company’s German subsidiary, resulting from improved expectations of future taxable income in those jurisdictions.

Although the Company generated taxable income in the United States during the period, the related current tax liability was partially offset by the utilization of deferred tax assets arising from the net operating loss carryforwards (“NOLCOs”).

The estimated effective tax rate applied to the nine-month period ended September 30, 2025 is higher than the U.S. federal statutory rate of 21% principally due to IRS section 162(m) adjustments, state income tax provisions, deemed interest and tax effect of foreign operations offset in part by the favorable effect of stock-based compensation, withholding taxes and a change in the valuation allowance.

The estimated annual effective tax rate applied to the nine-month period ended September 30, 2024 differs from the U.S. federal statutory rate of 21% principally due to the release of the U.S. valuation allowance, state income taxes and provision on uncertain tax positions.

The Company determined on March 31, 2025 that it was more likely than not that one of the Company’s subsidiaries in Canada would be able to realize the benefit of the deferred tax assets in Canada, resulting in the release of the valuation allowance. In reaching this determination, the Company considered the growing trend of profitability over the last three years in the Canadian subsidiary, as well as expectations regarding the generation of future taxable income.

The Company determined on June 30, 2025 that it was more likely than not that the Company’s subsidiary in Germany would be able to realize the benefit of the deferred tax assets in Germany, resulting in the release of the valuation allowance. In reaching this determination, the Company considered the growing trend of profitability over the last three years in the German subsidiary, as well as expectations regarding the generation of future taxable income.

Impact of Recent Tax Legislation

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, amending U.S. tax law in several areas, including domestic research and development deductibility and bonus depreciation. The Company has included the estimated effect of provisions relevant to the current quarter in its reported income tax expense for the three months ending September 30, 2025. Management is continuing to evaluate the OBBBA’s potential impact on future periods, particularly with respect to deferred tax assets and liabilities, the effective tax rate, and cash tax obligations. The Company will update its assessment as additional interpretive guidance or implementing regulations are issued.

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The reconciliations of the U.S. federal statutory rate with the Company’s effective tax rate for the nine months ended September 30, 2025 and 2024, respectively, are summarized in the table below:


	For the Nine Months
	Ended September 30,
	2025		2024
Federal income tax expense at statutory rate	21.0	%	21.0	%
Effect of:
Section 162 (m)	9.3		-
State income tax net of federal benefit	2.9		(4.5)
Deemed interest	2.8		(0.9)
Tax effects of foreign operations	1.0		0.8
Foreign operations permanent differences - foreign exchange gains and losses	0.5		0.3
GILTI provisions	0.4		2.8
Change in unrecognized tax benefits (ASC 740)	0.3		(3.1)
Return to provision true up	-		(1.4)
Change in tax rates	(0.4)		-
Foreign rate differential	(0.4)		(0.7)
Change in valuation allowance	(1.2)		(54.6)
Withholding tax	(2.1)		0.8
Effect of stock-based compensation	(11.5)		(0.4)
Other	(0.3)		0.1
Effective tax rate	22.3	%	(39.8)	%

The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the nine months ended September 30, 2025 (in thousands):


	Unrecognized
	Tax Benefits
Balance - January 1, 2025	$	999
Increase for current period tax positions		250
Decrease for prior year tax positions		(214)
Interest accrual		44
Foreign currency remeasurement		(27)
Balance - September 30, 2025	$	1,052

5.Operating Leases

The Company has various lease agreements for its offices and service delivery centers and has determined that the risks and benefits related to these leased properties are retained by the lessors. Accordingly, these are accounted for as operating leases. Lease agreements with a term of less than one year are treated as short-term leases and are accounted for separately as shown in the table below.

Most of these lease agreements are renewable at the mutual consent of the parties to the contract. These lease agreements are for terms ranging from two to eleven years and, in most cases, provide for rent escalations ranging from 1.75% to 15%.

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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				For the Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Rent expense for long-term operating leases	$	337	$	314	$	966	$	943
Rent expense for short-term leases		46		51		136		142
Total rent expense	$	383	$	365	$	1,102	$	1,085

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 September 30, 2025 (in thousands):


Year	Amount
Remaining for 2025	$	368
2026		1,562
2027		1,560
2028		1,159
2029		722
2030 and thereafter		194
Total lease payments		5,565
Less: Interest		(888)
Net present value of lease liabilities	$	4,677

Current portion	$	1,122
Long-term portion		3,555
Total	$	4,677

The weighted average remaining lease terms and discount rates for all of the Company’s operating leases as of September 30, 2025 were as follows:


Weighted-average lease term remaining	41 months
Weighted-average discount rate	9.16	%

6.Long-term obligations

Total long-term obligations as of September 30, 2025 and December 31, 2024 consisted of the following (in thousands):


	September 30,		December 31,
	2025		2024
Pension obligations - accrued pension liability	$	8,670	$	7,945
Microsoft licenses ⁽¹⁾		111		442
		8,781		8,387
Less: Current portion of long-term obligations		1,221		1,643
Total Non-Current portion of long-term obligations	$	7,560	$	6,744

(1)In March 2023, the Company renewed a vendor agreement to acquire certain additional software licenses, receive technical support and future software upgrades on software licenses through February 2026. Pursuant to this agreement, the Company is contractually liable to pay approximately $0.4 million annually over the term of the agreement.

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7.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 $5.6 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 legal interest 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.

In February 2024, David D’Agostino filed a putative class action captioned D’Agostino v. Innodata Inc., et al., in the United States District Court for the District of New Jersey against the Company and certain of its current and former officers (the “Securities Class Action”). In October 2024, the presiding judge in the Securities Class Action appointed a lead plaintiff and approved the lead plaintiff’s choice of counsel. The Securities Class Action complaint, as amended, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and it alleges, among other things, that the defendants made false and misleading statements regarding the Company’s artificial intelligence (“AI”) technology and services. The plaintiff seeks unspecified damages, fees, interest, and costs. The Company intends to defend itself vigorously. On March 7, 2025, the Company filed a motion to dismiss the Securities Class Action complaint. On April 10, 2025, the plaintiff filed a Second Amended Complaint to the Securities Class Action complaint (the “Second Amended Complaint”) to correct purported typographical errors in the Securities Class Action complaint. On April 11, 2025, the Company filed a motion to dismiss the Second Amended Complaint. The motion to dismiss is fully briefed and pending with the USDC. The Company cannot predict the outcome of the action at this time and can give no assurance that the asserted claims will not have a material adverse effect on its financial position or results of operations.

The Company is also subject to various other legal proceedings and claims that have arisen in the ordinary course of business. While the Company believes that it has adequate reserves for those losses that it believes are probable and can be reasonably estimated, the ultimate results of legal proceedings and claims cannot be predicted with certainty.

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 described above 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 $500,000 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.

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8.Stock Options and Restricted Stock Units

The stock-based compensation expense related to the Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016 (the “2013 Plan”) and the Innodata Inc. 2021 Equity Compensation Plan, as amended and restated effective as of April 11, 2022 (the “2021 Plan”, and together with the 2013 Plan, collectively, the “Equity Plans”) were allocated as follows (in thousands):


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Direct operating costs	$	444	$	43	$	1,312	$	200
Selling and administrative expenses		2,263		812		6,997		2,681
Total stock-based compensation	$	2,707	$	855	$	8,309	$	2,881

Stock Options

2013 Plan

A summary of option activity under the 2013 Plan and changes during each of the nine-month periods ended September 30, 2025 and 2024 are presented below:


				Weighted-Average
		Weighted - Average		Remaining Contractual	Aggregate
	Number of Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2025	3,165,193	$	3.67	6.32	$	113,458,326
Granted	-		-	-		-
Exercised	(246,742)		4.57	-		-
Forfeited/Expired	-		-	-		-
Outstanding at September 30, 2025	2,918,451	$	3.60	5.60	$	214,423,447

Exercisable at September 30, 2025	2,820,116	$	3.60	5.55	$	207,180,091

Vested and Expected to vest at September 30, 2025	2,918,451	$	3.60	5.60	$	214,423,447


				Weighted-Average
		Weighted - Average		Remaining Contractual	Aggregate
	Number of Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2024	5,339,162	$	3.22	6.38	$	28,640,009
Granted	-		-	-		-
Exercised	(159,232)		4.07	-		-
Forfeited/Expired	(4,001)		6.96	-		-
Outstanding at September 30, 2024	5,175,929	$	3.19	5.62	$	70,306,343

Exercisable at September 30, 2024	3,586,369	$	2.45	4.78	$	51,361,592

Vested and Expected to vest at September 30, 2024	5,175,929	$	3.19	5.62	$	70,306,343

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2021 Plan

A summary of option activity under the 2021 Plan and changes during the nine-month periods ended September 30, 2025 and 2024 are presented below.


				Weighted-Average
		Weighted - Average		Remaining Contractual	Aggregate
	Number of Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2025	842,271	$	15.86	8.46	$	20,847,471
Granted	-		-	-		-
Exercised	(119,739)		3.51	-		-
Forfeited/Expired	(22,668)		3.41	-		-
Outstanding at September 30, 2025	699,864	$	18.38	7.85	$	41,075,152

Exercisable at September 30, 2025	194,006	$	3.32	6.98	$	14,308,582

Vested and Expected to vest at September 30, 2025	699,864	$	18.38	7.85	$	41,075,152


				Weighted-Average
		Weighted - Average		Remaining Contractual	Aggregate
	Number of Options	Exercise Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2024	923,571	$	3.41	8.76	$	4,786,252
Granted	-		-	-		-
Exercised	(47,596)		3.41	-		-
Forfeited/Expired	(9,668)		5.40	-		-
Outstanding at September 30, 2024	866,307	$	3.39	8.01	$	11,591,122

Exercisable at September 30, 2024	339,613	$	3.36	7.99	$	4,554,490

Vested and Expected to vest at September 30, 2024	866,307	$	3.39	8.01	$	11,591,122

There were no options granted during the nine months ended September 30, 2025 and 2024.

During the nine months ended September 30, 2025, a total of 366,481 options were exercised at an average exercise price of $4.22.

The compensation cost related to non-vested stock options not yet recognized as of September 30, 2025 totaled approximately $6.4 million. The weighted-average period over which these costs will be recognized is 27 months.

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Restricted Stock Units

Restricted stock unit activity under the Equity Plans during each of the nine-month periods ended September 30, 2025 and 2024 are presented below:


		Weighted-Average
	Number of	Grant Date
	Restricted Stock Units	Fair Value
Unvested at January 1, 2025	1,249,079	$	20.98
Granted	39,049		54.12
Vested	(214,506)		6.43
Forfeited/Expired	(555,208)		7.97
Unvested at September 30, 2025	518,414	$	43.44


		Weighted-Average
	Number of	Grant Date
	Restricted Stock Units	Fair Value
Unvested at January 1, 2024	749,756	$	5.77
Granted	28,973		15.10
Vested	(48,761)		8.42
Forfeited/Expired	(995)		8.29
Unvested at September 30, 2024	728,973	$	5.96

A total of 11,829 restricted stock units were granted to non-employee directors during the nine months ended September 30, 2025.

The compensation cost related to non-vested restricted stock units not yet recognized as of September 30, 2025 totaled approximately $17.0 million. The weighted-average period over which these costs will be recognized is 26 months.

9.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 and changes in fair value of derivatives, net of taxes. The components of accumulated other comprehensive loss as of September 30, 2025 and 2024, and reclassifications from accumulated other comprehensive loss for the three and nine-month periods, are presented below (in thousands):


	Pension				Foreign Currency
	Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at July 1, 2025	$	(269)	$	127	$	(1,151)	$	(1,293)
Other comprehensive loss before reclassifications, net of taxes		-		(378)		(178)		(556)
Total other comprehensive loss before reclassifications, net of taxes		(269)		(251)		(1,329)		(1,849)
Net amount reclassified to earnings		(1)		63		-		62
Balance at September 30, 2025	$	(270)	$	(188)	$	(1,329)	$	(1,787)

Table of Contents

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Pension				Foreign Currency
	Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at January 1, 2025	$	(233)	$	(395)	$	(1,842)	$	(2,470)
Other comprehensive income (loss) before reclassifications, net of taxes		(37)		8		513		484
Total other comprehensive loss before reclassifications, net of taxes		(270)		(387)		(1,329)		(1,986)
Net amount reclassified to earnings		-		199		-		199
Balance at September 30, 2025	$	(270)	$	(188)	$	(1,329)	$	(1,787)


	Pension				Foreign Currency
	Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at July 1, 2024	$	(413)	$	(167)	$	(1,458)	$	(2,038)
Other comprehensive loss before reclassifications, net of taxes		-		198		245		443
Total other comprehensive income (loss) before reclassifications, net of taxes		(413)		31		(1,213)		(1,595)
Net amount reclassified to earnings		(1)		23		-		22
Balance at September 30, 2024	$	(414)	$	54	$	(1,213)	$	(1,573)


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at January 1, 2024	$	(412)	$	41	$	(1,250)	$	(1,621)
Other comprehensive income (loss) before reclassifications, net of taxes		-		(8)		37		29
Total other comprehensive income (loss) before reclassifications, net of taxes		(412)		33		(1,213)		(1,592)
Net amount reclassified to earnings		(2)		21		-		19
Balance at September 30, 2024	$	(414)	$	54	$	(1,213)	$	(1,573)

Taxes related to each component of other comprehensive loss were not material for each of the three and nine-month periods presented and therefore not disclosed separately.

All reclassifications from accumulated other comprehensive income (loss) had an impact on direct operating costs in the condensed consolidated statements of operations and comprehensive income.

10.Segment reporting and concentrations

The Company’s operations are classified in three reporting segments: Digital Data Solutions (“DDS”), Synodex and Agility.

INNODATA INC 10-Q