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, ~~2017~~2023


☐	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 001-33287

INFORMATION SERVICES GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware		20-5261587
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

~~Two~~ 2187 Atlantic Street
Stamford ~~Plaza~~, CT06902
281 Tresser Boulevard
Stamford, CT 06901
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: ~~(203)~~ (203) 517-3100

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


Title of each class	Trading symbol	Name of each exchange on which registered
Shares of Common Stock, $0.001 par value	III	The Nasdaq Stock Market LLC

Indicate by check mark whether the ~~Registrant~~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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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. (Check one):

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

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No~~

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 Act). ☐ Yes ⌧ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at October ~~27, 2017~~31, 2023
Common Stock, $0.001 par value		~~43,400,494~~48,873,566 shares

CAUTIONARY NOTE REGARDING

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10–Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. ~~The~~Our actual results ~~of ISG~~ may vary materially from those expected or anticipated in these forward-looking statements. The realization of such forward-looking statements may be impacted by certain important unanticipated factors. Because of these and other factors that may affect ~~ISG’s~~our operating results, past performance should not be considered as an indicator of future performance, and investors should not use historical results to anticipate results or trends in future periods. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers should carefully review the risk factors described in this and other documents that ~~ISG files~~we file from time to time with the Securities and Exchange Commission, including subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

PART I — FINANCIAL INFORMATION

ITEM ~~1.FINANCIAL~~1.FINANCIAL STATEMENTS (UNAUDITED)

INFORMATION SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

September 30,

December 31,

2017

2016

ASSETS

Current assets

Cash and cash equivalents

$
22,227

$
34,485

Accounts and unbilled receivables, net of allowance of $615 and $494, respectively

74,796

64,662

Deferred tax asset

—

1,730

Prepaid expense and other current assets

4,523

5,374

Total current assets

101,546

106,251

Restricted cash

92

497

Furniture, fixtures and equipment, net

4,603

4,789

Goodwill

85,602

85,940

Intangible assets, net

28,065

35,113

Other assets

4,889

2,532

Total assets

$
224,797

$
235,122

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$
8,267

$
9,724

Current maturities of long-term debt

14,815

5,546

Deferred revenue

8,196

9,112

Accrued expenses

22,527

27,971

Total current liabilities

53,805

52,353

Long-term debt, net of current maturities

100,707

116,485

Deferred tax liability

—

396

Other liabilities

6,516

7,476

Total liabilities

161,028

176,710

Commitments and contingencies (Note 6)

Redeemable non-controlling interest

—

1,376

Stockholders’ equity

Preferred stock, $.001 par value; 10,000 shares authorized; none issued

—

—

Common stock, $.001 par value, 100,000 shares authorized; 44,490 shares issued and 43,340 outstanding at September 30, 2017 and 44,203 shares issued and 42,140 outstanding at December 31, 2016

44

44

Additional paid-in capital

228,761

228,692

Treasury stock (1,150 and 2,063 common shares, respectively, at cost)

(4,022)

(8,216)

Accumulated other comprehensive loss

(5,850)

(7,800)

Accumulated deficit

(155,164)

(155,684)

Total stockholders’ equity

63,769

57,036

Total liabilities, redeemable non-controlling interest and stockholders’ equity

$
224,797

$
235,122


	September 30,		December 31,
	2023		2022
ASSETS
Current assets
Cash and cash equivalents	$	18,650	$	30,587
Accounts receivable and contract assets, net of allowance of $433 and $272, respectively		92,499		80,170
Prepaid expenses and other current assets		7,268		4,724
Total current assets		118,417		115,481
Restricted cash		166		83
Furniture, fixtures and equipment, net		5,418		5,929
Right-of-use lease assets		5,379		6,780
Goodwill		94,874		94,972
Intangible assets, net		12,027		14,380
Deferred tax assets		3,224		2,818
Other assets		4,084		2,585
Total assets	$	243,589	$	243,028
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	11,771	$	15,925
Current maturities of long-term debt		—		4,300
Contract liabilities		6,688		7,058
Accrued expenses and other current liabilities		22,481		23,908
Total current liabilities		40,940		51,191
Long-term debt, net of current maturities		79,175		74,416
Deferred tax liabilities		2,553		2,391
Operating lease liabilities		3,591		4,857
Other liabilities		11,602		9,742
Total liabilities		137,861		142,597
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued		—		—
Common stock, $0.001 par value; 100,000 shares authorized; 49,472 shares issued and 48,808 outstanding at September 30, 2023 and 49,472 shares issued and 48,300 outstanding at December 31, 2022		49		49
Additional paid-in capital		218,843		226,293
Treasury stock (664 and 1,172 common shares, respectively, at cost)		(3,384)		(7,487)
Accumulated other comprehensive loss		(9,948)		(9,677)
Accumulated deficit		(99,832)		(108,747)
Total stockholders’ equity		105,728		100,431
Total liabilities and stockholders’ equity	$	243,589	$	243,028

The accompanying notes are an integral part of these condensed consolidated financial statements.

INFORMATION SERVICES GROUP, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Revenues

$
68,349

$
51,929

$
202,942

$
162,212

Operating expenses

Direct costs and expenses for advisors

38,214

30,959

119,153

98,433

Selling, general and administrative

23,710

16,613

68,815

52,428

Depreciation and amortization

2,951

1,741

9,773

5,386

Operating income

3,474

2,616

5,201

5,965

Interest income

15

—

94

24

Interest expense

(1,716)

(596)

(5,132)

(1,590)

Foreign currency transaction loss

(111)

(38)

(292)

(300)

Income (loss) before taxes

1,662

1,982

(129)

4,099

Income tax provision (benefit)

234

1,226

(681)

2,331

Net income

$
1,428

$
756

$
552

$
1,768

Net income attributable to non-controlling interest

—

24

32

123

Net income attributable to ISG

$
1,428

$
732

$
520

$
1,645

Weighted average shares outstanding:

Basic

43,305

35,707

42,893

36,219

Diluted

44,658

36,873

43,344

36,977

Earnings per share attributable to ISG:

Basic

$
0.03

$
0.02

$
0.01

$
0.05

Diluted

$
0.03

$
0.02

$
0.01

$
0.05

Comprehensive income:

Net income

$
1,428

$
756

$
552

$
1,768

Foreign currency translation, net of tax (expense) benefit of $(232), $(22), $(1,161) and $44, respectively.

601

100

1,950

(9)

Comprehensive income:

$
2,029

$
856

$
2,502

$
1,759

Comprehensive income attributable to non-controlling interest

—

24

32

123

Comprehensive income attributable to ISG

$
2,029

$
832

$
2,470

$
1,636


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues	$	71,773	$	68,836	$	224,868	$	212,100
Operating expenses
Direct costs and expenses for advisors		43,032		39,786		138,048		125,111
Selling, general and administrative		20,992		20,334		63,992		60,806
Depreciation and amortization		1,526		1,286		4,692		3,872
Operating income		6,223		7,430		18,136		22,311
Interest income		104		37		285		126
Interest expense		(1,533)		(824)		(4,676)		(1,997)
Foreign currency transaction (loss) gain		(2)		131		(40)		248
Income before taxes		4,792		6,774		13,705		20,688
Income tax provision		1,591		1,218		4,680		5,245
Net income	$	3,201	$	5,556	$	9,025	$	15,443
Weighted average shares outstanding:
Basic		48,711		47,888		48,542		48,191
Diluted		50,257		49,844		50,287		50,637
Earnings per share:
Basic	$	0.07	$	0.12	$	0.19	$	0.32
Diluted	$	0.06	$	0.11	$	0.18	$	0.30
Comprehensive income:
Net income	$	3,201	$	5,556	$	9,025	$	15,443
Foreign currency translation loss, net of tax benefit of $128, $629, $86 and $1,515, respectively		(427)		(1,997)		(271)		(4,799)
Comprehensive income	$	2,774	$	3,559	$	8,754	$	10,644

The accompanying notes are an integral part of these condensed consolidated financial statements.

INFORMATION SERVICES GROUP, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in-		Treasury		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Stock		Loss		Deficit		Equity
Balance June 30, 2023	49,472	$	49	$	221,094	$	(5,128)	$	(9,521)	$	(103,033)	$	103,461
Net Income	—		—		—		—		—		3,201		3,201
Other comprehensive loss	—		—		—		—		(427)		—		(427)
Treasury shares repurchased	—		—				(923)		—		—		(923)
Proceeds from issuance of ESPP shares	—		—		(63)		301		—		—		238
Issuance of treasury shares for RSUs vested	—		—		(2,366)		2,366		—		—		—
Accrued dividends on unvested shares	—		—		427		—		—		—		427
Cash dividends paid to shareholders ($0.045 per share)	—		—		(2,345)		—		—		—		(2,345)
Stock based compensation	—		—		2,096		—		—		—		2,096
Balance September 30, 2023	49,472	$	49	$	218,843	$	(3,384)	$	(9,948)	$	(99,832)	$	105,728

								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in-		Treasury		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Stock		Loss		Deficit		Equity
Balance December 31, 2022	49,472	$	49	$	226,293	$	(7,487)	$	(9,677)	$	(108,747)	$	100,431
Net Income	—		—		—		—		—		9,025		9,025
Other comprehensive loss	—		—		—		—		(271)		—		(271)
Impact of change in accounting policy (Note 3)	—		—		—		—		—		(110)		(110)
Treasury shares repurchased	—		—		—		(4,455)		—		—		(4,455)
Proceeds from issuance of ESPP shares	—		—		(285)		1,004		—		—		719
Issuance of treasury shares for RSUs vested	—		—		(7,554)		7,554		—		—		—
Accrued dividends on unvested shares	—		—		169		—		—		—		169
Cash dividends paid to shareholders ($0.13 per share)	—		—		(6,532)		—		—		—		(6,532)
Stock based compensation	—		—		6,752		—		—		—		6,752
Balance September 30, 2023	49,472	$	49	$	218,843	$	(3,384)	$	(9,948)	$	(99,832)	$	105,728

Nine Months Ended

September 30,

2017

2016

Cash flows from operating activities

Net income

$
552

$
1,768

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

2,640

1,337

Amortization of intangible assets

7,133

4,049

Tax expense from stock issuances

315

110

Amortization of deferred financing costs

739

130

Loss on sublease

578

—

Stock-based compensation

5,383

5,180

Change in fair value of contingent consideration

145

(279)

Changes in accounts receivable allowance

398

(16)

Deferred tax benefit

(2,338)

(1,267)

Loss on disposal of fixed assets

23

—

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(10,424)

2,341

Prepaid expense and other assets

1,628

(1,516)

Accounts payable

(1,458)

38

Deferred revenue

(980)

(1,408)

Debt issuance costs

(38)

198

Accrued expenses

(1,023)

829

Net cash provided by operating activities

3,273

11,494

Cash flows from investing activities

Acquisitions, net of cash acquired

(889)

(1,862)

Restricted cash

405

56

Purchase of furniture, fixtures and equipment

(2,270)

(1,904)

Net cash used in investing activities

(2,754)

(3,710)

Cash flows from financing activities

Proceeds from debt

—

13,500

Principal payments on borrowings

(7,151)

(4,850)

Proceeds from issuance of ESPP shares

494

444

Payment of contingent consideration

(2,665)

(2,483)

Payment for acquisition of Experton

(543)

—

Payments related to tax withholding for stock-based compensation

(2,174)

(1,576)

Debt issuance costs

—

9

Tax expense from stock issuances

—

(110)

Equity securities repurchased

(2,853)

(11,441)

Net cash used in financing activities

(14,892)

(6,507)

Effect of exchange rate changes on cash

2,115

21

Net (decrease) increase in cash and cash equivalents

(12,258)

1,298

Cash and cash equivalents, beginning of period

34,485

17,835

Cash and cash equivalents, end of period

$
22,227

$
19,133

Supplemental disclosures of cash flow information:

Noncash financing activities:

Issuance of treasury stock for vested restricted stock awards

$
6,437

$
4,973

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)

losses, useful lives of furniture, fixtures and equipment and definite lived intangible assets, depreciation expense, ~~contingent consideration,~~ fair value assumptions in ~~analyzing~~evaluating goodwill ~~and intangible asset impairments,~~for impairment, income taxes and deferred tax asset valuation and the valuation of ~~stock based~~stock-based compensation.

~~INFORMATION SERVICES GROUP, INC.~~Restricted Cash

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)~~

~~(tabular amounts in thousands, except per share data)~~Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes.

~~(unaudited)~~

Fair Value

The carrying value of the Company’s cash and cash equivalents, ~~restricted cash,~~ receivables, accounts payable, other current liabilities and accrued interest approximated their fair values atas of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 due to the short-term nature of these ~~instruments.~~accounts.

Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would consist of measurements primarily to goodwill, intangible assets and other long-lived assets and assets acquired and liabilities assumed in a business combination.

Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy:

●

Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market;

●

Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and

●

Level 3 measurements include those that are unobservable and of a highly subjective measure.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)

The following tables summarize the assets and liabilities (as applicable) measured at fair value on a recurring basis at the dates indicated:


	Basis of Fair Value Measurements
	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	18	$	—	$	—	$	18
Total	$	18	$	—	$	—	$	18

Liabilities:
Contingent consideration ⁽¹⁾	$	—	$	—	$	4,210	$	4,210
Total	$	—	$	—	$	4,210	$	4,210


	Basis of Fair Value Measurements
	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	18	$	—	$	—	$	18
Total	$	18	$	—	$	—	$	18

Liabilities:
Contingent consideration ⁽¹⁾	$	—	$	—	$	5,593	$	5,593
Total	$	—	$	—	$	5,593	$	5,593

Basis of Fair Value Measurements

September 30, 2017


Level 1

Level 2

Level 3

Total

Assets:

Cash equivalents

$
1,548

$
—

$
—

$
1,548

Total

$
1,548

$
—

$
—

$
1,548

Liabilities:

Contingent consideration (1)

$
—

$
—

$
3,890

$
3,890

Total

$
—

$
—

$
3,890

$
3,890

Basis of Fair Value Measurements

December 31, 2016


Level 1

Level 2

Level 3

Total

Assets:

Cash equivalents

$
22

$
—

$
—

$
22

Total

$
22

$
—

$
—

$
22

Liabilities:

Contingent consideration (1)

$
—

$
—

$
6,073

$
6,073

Total

$
—

$
—

$
6,073

$
6,073

(1)

⁽¹⁾

The ~~short-term portion is~~current and noncurrent contingent consideration are included in “Accrued ~~expenses.~~expenses and other current liabilities” and “Other liabilities,” ~~The long-term portion is included in “Other liabilities.”~~

respectively, as of September 30, 2023 and December 31, 2022.

~~INFORMATION SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)~~

~~(tabular amounts in thousands, except per share data)~~

~~(unaudited)~~

The ~~Company’s~~following table represents the change in the contingent consideration liability ~~was $3.9 million and $6.1 million at~~during the nine months ended September 30, 2017 and December 31, 2016, respectively. The fair value measurement of this contingent consideration is classified within Level 3 of the fair value hierarchy and reflects the Company’s own assumptions in measuring fair values using the income approach. In developing these estimates, the Company considered certain performance projections, historical results, and industry trends. This amount was estimated through a valuation model that incorporated probability-weighted assumptions related to the achievement of these milestones and the likelihood of the Company making payments. These cash outflow projections have then been discounted using a rate ranging from 14.5% to 19.8%.2023:


	Nine Months Ended
	September 30,
	2023
Beginning Balance	$	5,593
Change 4 Growth contingent consideration payment		(1,460)
Accretion of contingent consideration		77
Ending Balance	$	4,210

The Company’s financial instruments include outstanding borrowings of ~~$118.1~~$79.2 million atboth as of September 30, ~~2017~~2023, and ~~$125.3 million at~~ December 31, ~~2016,~~2022, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the ~~Company's~~Company’s outstanding borrowings iswas approximately ~~$118.0~~$79.9 million and ~~$124.9~~$76.5 million atas of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the ~~Company's~~Company’s incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows ~~ranged from 2.00% to 4.83%.~~was 7.0% and 6.3% as of September 30, 2023 and December 31, 2022, respectively. The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market ~~conditions.~~

~~The following table represents~~conditions and interest rates. In the ~~change in~~third quarter of 2023, the ~~contingent consideration liability~~Company borrowed $5.0 million against the revolver and subsequently repaid $5.0 million during the ~~nine months ended September 30, 2017 and 2016:~~

Nine Months Ended

September 30,


2017

2016

Beginning Balance

$
6,073

$
4,019

Payment of contingent consideration

(3,386)

(2,483)

Acquisitions

—

4,841

Change in fair value of contingent consideration

145

(279)

Accretion of contingent consideration

1,030

568

Unrealized gain related to currency translation

28

61

Ending Balance

$
3,890

$
6,727

~~Recently Issued Accounting Pronouncements~~

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that outlines a single comprehensive model for entities to use~~quarter. The Company is currently in accounting for revenue. Under the guidance, revenue is recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard is effective for public entitiescompliance with annual and interim reporting periods beginning after December 15, 2016. On July 9, 2015, the FASB approved the deferral of the effective date of the new revenue guidance by one year to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective transition method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The guidance also requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which we are currently compiling. We have completed an initial assessment of the impact of the guidance on our existing revenue recognition policies. We currently anticipate that our historical revenue recognition will not significantly change other than for software and implementation contracts, certain network contingency contracts, and certain managed service implementation contracts. For software and implementation contracts, revenue recognition on the software component will be accelerated to the point at which software is installed, while revenue on the implementation component will be recognized over the software implementation period as a percentage of hours incurred to date as compared to the totalits financial covenants.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS-~~STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable and contract assets, and available-for-sale debt securities. The new guidance replaces the existing incurred loss impairment model with an expected ~~hours. On certain network contingency contracts, revenue~~loss methodology, which will ~~be recognized over time due to the existence~~result in more timely recognition of provisions for payment for progress incurred to date plus a margin in contracts with termination for convenience clauses. On the implementation phase of certain managed service contracts, revenue will be recognized over time as a percentage of hours incurred to date as compared to the total expected hours.credit losses and additional disclosures. We ~~will be adopting the~~adopted this standard using the ~~cumulative catch-up transition~~modified retrospective approach with an effective date of January 1, 2023. The Company recognized a cumulative-effect adjustment increasing accumulated deficit and increasing the allowance for credit losses by $0.1 million.

NOTE 4—ACQUISITIONS

Change 4 Growth Acquisition

On October 31, 2022, a subsidiary of the Company executed an Asset Purchase Agreement with Change 4 Growth, LLC (“Change 4 Growth”) and consummated the acquisition of substantially all the assets, and assumed certain liabilities, of Change 4 Growth. The purchase price was comprised of $3.8 million of cash consideration, $0.6 million of shares of ISG common stock issued promptly after closing and Change 4 Growth will also have the right to receive additional consideration paid via earn-out payments, if certain financial targets are met. At the agreement date, the Company estimated such earn-out payment would be $5.6 million.

The following table summarizes the consideration transferred to acquire Change 4 Growth and the amounts of identified assets acquired, and liabilities assumed, as of the agreement date:


Cash	$	3,450
Accrued working capital adjustment		378
ISG common stock		600
Contingent consideration		5,560
Total allocable purchase price	$	9,988

This acquisition was accounted for under the acquisition method of ~~adoption~~accounting, and as such, the aggregate purchase price was allocated to the assets acquired and liabilities assumed based on ~~January 1, 2018. The Company is in~~ the ~~process of preparing for the enhanced disclosure requirements~~fair values as of the new standard as well as evaluating its impact on our processes and controls. We will continue to evaluate the impact of our pending adoption of this guidance to our consolidated financial statements and our preliminary assessments are subject to change.

~~In November 2015, the FASB issued an accounting standards update to simplify the presentation of deferred income taxes~~closing date. Based on the ~~balance sheet.~~ valuation and other factors as described above, the purchase price assigned to intangible assets were as follows:


Accounts receivable and contract assets	$	1,841
Intangible assets		4,300
Accounts payable and accrued expense		(428)
Contract liabilities		(85)
Net assets acquired	$	5,628

Goodwill	$	4,360

The ~~update requires~~primary factors that ~~all deferred~~drove the goodwill recognized, the majority of which is deductible for tax assets and liabilities be classified as noncurrent. The current guidance that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not impacted by this update. The provisionspurposes, were the inclusion of the ~~new standard are effective beginning January 1, 2017, for annual~~legacy Change 4 Growth workforce and ~~interim periods~~associated organizational change management expertise to enhance and early adoption is permitted. The Company adopted this guidance on a prospective method; therefore, prior periods were not retrospectively adjusted. As a result of this adoption, $2.6 million of net current deferred tax assets are included inexpand the ~~net noncurrent deferred tax assets as of September 30, 2017. The adoption of this guidance in the first quarter of 2017 by the Company did not have a material impact on its results of operations.~~

In February 2016, the FASB issued guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The guidance requires the use of a modified retrospective approach. The Company is evaluating the impactofferings of the ~~guidance on its consolidated financial statements and related disclosures.~~

In March 2016, the FASB issued ASU 2016-09, amended guidance related to employee share-based payment accounting. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allows an employer to repurchase more of an employee’s shares than previously allowed for tax withholding purposes without triggering liability accounting, allows a company to make a policy election to account for forfeitures as they occur, and eliminates the requirement that excess tax benefits be realized before companies can recognize them. The new guidance also requires excess tax benefits and tax shortfalls to be presented on the cash flow statement as an operating activity rather than as a financing activity, and clarifies that cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation are to be presented as a financing activity. This guidance is effective prospectively for annual reporting periods, and interim periods therein, beginning after December 15, 2016.

~~We have adopted ASU 2016-09 effective January 1, 2017 on a prospective basis as permitted by the new standard. As a result of this adoption:~~

~~Tax expenses of $0.3 million were recognized on stock-based compensation expense were reflected as a component of the provision for income taxes for the nine months ended September 30, 2017.~~

~~We elected to adopt the cash flow presentation of the excess tax benefits prospectively where these benefits are classified along with other income tax cash flows as operating cash flows.~~

We have elected to continue to estimate the number of stock-based awards expected to vest, rather than electing to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period.

ISG Enterprise Change service line.

810

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS-~~STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)

Costs associated with this acquisition are included in the selling, general and administrative expense in the Consolidated Statement of Income and Comprehensive Income and totaled $0.2 million during year ended December 31, 2022. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

We presented employee taxes paid as a financing activity on the Condensed Consolidated Statements of Cash Flows retrospectively, as such the comparable period within the Condensed Consolidated Statements of Cash Flows has been recast to reflect the adoption.


	Purchase Price		Estimated
	Allocation		Useful Lives
Amortizable intangible assets:
Trademark and trade name	$	1,100	3 years
Customer relationships		2,900	8 years
Noncompete agreements		300	2 years
Total intangible assets	$	4,300

NOTE 5—REVENUE

The ~~adoption~~majority of ~~this guidance~~our revenue is derived from contracts that can span from a few months to several years. We enter into contracts that can include various combinations of services, which, depending on the contract type, are sometimes capable of being distinct. If services are determined to be distinct, they are accounted for as separate performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the ~~first quarter of 2017 by~~contracts and, therefore, is not distinct. For contracts with multiple performance obligations, the Company ~~did not have a material impact on its results~~allocates the transaction price to each performance obligation using our best estimate of ~~operations.~~

~~In August 2016,~~ the ~~FASB issued new guidance intended to reduce diversity in practice in how certain cash receipts and payments are classified~~standalone selling price, or SSP, of each distinct product or service in the statement of cash flows, including debt prepayment or extinguishment costs, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, and distributions from certain equity method investees. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application using a retrospective transition method.contract. The Company ~~is evaluating the impact~~establishes SSP based on management’s estimated selling price or observable prices of ~~the guidance on its consolidated financial statements~~products or services sold separately in comparable circumstances to similar clients.

Our contracts may include promises to transfer multiple services and ~~related disclosures.~~products to a client. Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require judgment.

Contract Balances

~~In November 2016, the FASB issued an accounting standard to require that amounts generally described as restricted cash and restricted cash equivalents be presented with cash~~The timing of revenue recognition, billings and cash ~~equivalents when reconciling the beginning-of-period~~collections result in billed accounts receivables, unbilled receivables (contract assets) and ~~end-of-period total amounts shown~~customer advances and deposits (contract liabilities). Our clients are billed based on the ~~statement~~type of ~~cash flows. If different,~~arrangement. A portion of our services is billed monthly based on hourly or daily rates. There are also client engagements in which we bill a ~~reconciliation of~~fixed amount for our services. This may be one single amount covering the ~~cash balances~~whole engagement or several amounts for various phases, functions or milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits before revenue is recognized, resulting in contract liabilities. Contract assets and liabilities are generally reported in the ~~cash flow statement~~current assets and current liabilities sections of the consolidated balance sheet, ~~would need~~at the end of each reporting period, based on the timing of the satisfaction of the related performance obligation(s). For multi-year software sales with annual invoicing, we perform a significant financing component calculation and recognize the associated interest income throughout the duration of the financing period. In addition, we reclassify the resulting contract asset balances as current and noncurrent receivables as receipt of the consideration is conditional only on the passage of time and there are no performance risk factors present. See the table below for a breakdown of contract assets and contract liabilities:

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)


	September 30,		December 31,
	2023		2022
Contract assets	$	44,585	$	32,249
Contract liabilities	$	6,688	$	7,058

Revenue recognized for the three and nine months ended September 30, 2023 that was included in the contract liability balance at January 1, 2023 was $0.6 million and $5.9 million, respectively, and primarily represented revenue from our subscription contracts.

Remaining Performance Obligations

As of September 30, 2023, the Company had $109.2 million of remaining performance obligations, the majority of which are expected to be ~~provided along with explanatory information. The guidance is effective on January 1, 2018. We have started an initial assessment of~~satisfied within the ~~impact of the guidance, and we do not expect it will have a material impact on our consolidated financial statements.~~next twelve months.

In January 2017, the FASB issued an accounting standard that changes the GAAP definition of a business which can impact the accounting for asset purchases, acquisitions, goodwill impairment, and other assessments. The guidance is effective on January 1, 2018. We are currently evaluating the impact of this guidance on the Company's consolidated financial statements.

In January 2017, the FASB issued an accounting standard that eliminates Step 2 of the goodwill impairment test, which required us to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The updated guidance is effective beginning January 1, 2020, with early adoption permitted, and will be applied on a prospective basis. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

NOTE 4—6—NET INCOME PER COMMON SHARE

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company. For the three months and nine months ended September 30, 2017, the effect of 34,374 stock appreciation rights (“SARs”) have not been considered in the diluted earnings per share, because the market price of the stock was less than the exercise price during the period in the computation, respectively. In addition, 2.52023, 0.5 million and 1.2 million restricted ~~shares~~stock units, respectively, and for both the three and nine months ended September 30, 2022, 0.0 millionrestricted stock units, have not been considered in the diluted earnings per share calculation, ~~for the nine months ended September 30, 2017,~~ as the effect would be anti-dilutive.

~~INFORMATION SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)~~

~~(tabular amounts in thousands, except per share data)~~

~~(unaudited)~~

The following ~~tables set~~table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

									Three Months Ended September 30,				Nine Months Ended September 30,

									2023		2022		2023		2022
Basic:
Net income attributable to ISG	$	1,428	$	732	$	520	$	1,645
Net income									$	3,201	$	5,556	$	9,025	$	15,443
Weighted average common shares		43,305		35,707		42,893		36,219		48,711		47,888		48,542		48,191
Earnings per share attributable to ISG	$	0.03	$	0.02	$	0.01	$	0.05
Earnings per share									$	0.07	$	0.12	$	0.19	$	0.32
Diluted:
Net income attributable to ISG	$	1,428	$	732	$	520	$	1,645
Interest expense of convertible debt, net of tax		2		1		6		21
Net income attributable to ISG, as adjusted	$	1,430	$	733	$	526	$	1,666
Net income									$	3,201	$	5,556	$	9,025	$	15,443

Basic weighted average common shares		43,305		35,707		42,893		36,219		48,711		47,888		48,542		48,191
Potential common shares		1,353		1,166		451		758		1,546		1,956		1,745		2,446
Diluted weighted average common shares		44,658		36,873		43,344		36,977		50,257		49,844		50,287		50,637
Diluted earnings per share attributable to ISG	$	0.03	$	0.02	$	0.01	$	0.05
Diluted earnings per share									$	0.06	$	0.11	$	0.18	$	0.30

NOTE 5—7—INCOME TAXES

The Company’s effective tax rate for the three and nine months ended September 30, ~~2017~~2023 was ~~14.1%~~33.2% and ~~527.9%~~34.1%, respectively, based on pretax income of ~~$1.7~~$4.8 million and ~~pretax loss of $0.1~~$13.7 million, respectively. The Company’s effective tax rate for the quarter ended September 30, 2023 was ~~less than~~impacted by non-deductible expenses and earnings and losses in certain foreign jurisdictions and the ~~statutory~~impact of the vesting of restricted stock units. The Company’s effective tax rate for the three and nine

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)

months ended September 30, 2022 was 18.0% and 25.4%, respectively. The difference is primarily due to the impact of ~~current quarter~~ earnings and losses in certain foreign jurisdictions ~~where the Company is currently precluded from recording a tax provision~~ and the impact of the ~~partial release~~vesting of previously unrecognized tax benefits. The effective tax rate was 61.9% and 56.9% for the three and nine months ended September 30, 2016. The difference was primarily due to the impact of current quarter earnings in jurisdictions where the Company is currently precluded from recording a tax provision for the three months ended September 30, 2017 and the impact of the partial release of previously unrecognized tax benefits.restricted stock units.

As of September 30, 2017, the Company had total unrecognized tax benefits of approximately $2.8 million all of which would impact the Company’s effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax provision in its condensed consolidated statement of operations. As of September 30, 2017, the Company’s accrual of interest and penalties amounted to $0.9 million. The Company recorded no material year-to-date change in accrual of unrecognized tax benefits and associated interest and penalties.

NOTE 6—8—COMMITMENTS AND CONTINGENCIES

The Company is subject to contingencies which arise through the ordinary course of business. All material liabilities of which management ~~were~~is aware are properly reflected in the financial statements atas of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022.

~~Saugatuck~~Change 4 Growth Contingent Consideration

As of September 30, ~~2017,~~2023, the Company has recorded a liability of ~~$0.6~~$4.2 million representing the estimated fair value of contingent consideration related to the acquisition of ~~Saugatuck, of~~Change 4 Growth, which ~~$0.3 million~~ is classified as “Accrued expenses and other current liabilities” and ~~included in accrued expenses~~“Other liabilities” on the consolidated balance sheet. ~~The Company paid $0.5 million in~~In April ~~2017 related to 2016 performance.~~

~~INFORMATION SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)~~

~~(tabular amounts in thousands, except per share data)~~

~~(unaudited)~~

~~Experton Contingent Consideration~~

~~As of September 30, 2017,~~2023, the Company ~~has recorded~~made a ~~liability of $0.8 million representing the estimated fair value of~~ contingent consideration ~~related to the acquisition~~payment of ~~Experton, of which $0.4 million is classified as current and included in accrued expenses on the consolidated balance sheet. The Company paid $0.1 million in July 2017 related to 2016 performance.~~$1.5 million.

~~TracePoint Contingent Consideration~~

As of September 30, 2017, the Company has recorded a liability of $2.5 million representing the estimated fair value of contingent consideration related to the acquisition of TracePoint, of which $1.4 million is classified as current and included in accrued expenses on the consolidated balance sheet. The Company paid $2.1 million in April 2017 related to 2016 performance.

~~Alsbridge Contingent Consideration~~

~~As of September 30, 2017, the Company paid the remaining $0.1 million in July 2017 representing the estimated fair value of contingent consideration related to the acquisition of Alsbridge.~~

~~Severance Accrual~~

The Company recorded $0.3 million of severance expense during the three months ended September 30, 2017. The charge was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses. As of September 30, 2017, the remaining balance in accrued severance is $0.2 million and is classified as current and included in accrued expenses on the consolidated balance sheet.

NOTE 7—9—SEGMENT AND GEOGRAPHICAL INFORMATION

The Company operates as one reportable segment consisting primarily of fact-based sourcing advisory services. The Company operates principally in the Americas, Europe and Asia Pacific.

Geographical revenue information for the segment is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

									Three Months Ended				Nine Months Ended
									September 30,				September 30,
									2023		2022		2023		2022
Revenues
Americas	$	41,524	$	29,239	$	122,581	$	86,832	$	42,469	$	42,174	$	133,149	$	123,059
Europe		19,732		16,611		61,443		56,885		22,090		19,321		69,496		66,039
Asia Pacific		7,093		6,079		18,918		18,495		7,214		7,341		22,223		23,002
	$	68,349	$	51,929	$	202,942	$	162,212
									$	71,773	$	68,836	$	224,868	$	212,100

The segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating income by geography or by service line for the purposes of making operating decisions or allocating resources.

~~INFORMATION SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)~~

~~(tabular amounts in thousands, except per share data)~~

~~(unaudited)~~

NOTE 8—10—FINANCING ARRANGEMENTS AND LONG-TERM DEBT

On ~~December 1, 2016,~~February 22, 2023, the Company ~~entered into an~~ amended and restated ~~senior secured credit facility (the “2016 Credit Agreement”) comprised of a $110.0 million term facility and a $30.0 million revolving facility, amending and restating~~ its senior secured credit facility ~~originally entered into on May 3, 2013.~~to increase the revolving commitments per the revolving facility (the “2023 Credit Agreement”) from $54.0 million to $140.0 million and eliminate its term loan. The material terms ofunder the ~~2016~~2023 Credit Agreement are as follows: Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:

●

~~Each of the term loan facility and~~The revolving credit facility has a maturity date of ~~December 1, 2021 (the “Maturity Date”).~~

February 22, 2028.

●

The credit facility is secured by all of the equity interests owned by the Company, and its direct and indirect domestic subsidiaries and, subject to agreed exceptions, the Company’s direct and indirect “first-tier” foreign subsidiaries, and a perfected first priority security interest in all of the Company’s and its direct and indirect domestic subsidiaries’ tangible and intangible assets.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

(unaudited)

●

The Company’s direct and indirect existing and future ~~wholly-owned~~wholly owned domestic subsidiaries serve as guarantors to the Company’s obligations under the senior secured facility.

●

At the Company’s option, the credit facility bears interest at a rate per annum equal to either (i) the “Base Rate” (which is the highest of (a) the rate publicly announced from time to time by the administrative agent as its “prime rate”, (b) the Federal Funds Rate plus 0.5% per annum and (c) ~~the Eurodollar Rate,~~Term SOFR, plus 1.0%), plus the applicable margin (as defined below) or (ii) ~~Eurodollar Rate (adjusted~~Term SOFR (which is the Term SOFR screen rate for ~~maximum reserves)~~the relevant interest period plus a credit spread adjustment of 0.10%) as determined by the ~~Administrative Agent,~~administrative agent, plus the applicable margin. The applicable margin is adjusted quarterly based upon the Company’s ~~quarterly~~consolidated leverage ratio. Prior to the end of the first ~~full quarter~~quarter-end following the closing of the credit facility, the applicable margin shall be a percentage per annum equal to ~~2.5%~~0.50% for ~~the term loans and~~ the revolving loans maintained as Base Rate loans or ~~3.5%~~1.50% for the ~~term loans and~~ revolving loans maintained as ~~Eurodollar~~Term SOFR loans.

●

The Term Loan is repayable in four consecutive quarterly installments of $1,375,000 each, commencing March 31, 2017, followed by eight consecutive quarterly installments in the amount of $2,062,500 each, commencing March 31, 2018, followed by seven consecutive quarterly installments of $2,750,000 each, commencing March 31, 2020 and a final payment of the remaining outstanding principal amount of the Term Loan on the Maturity Date.

Mandatory repayments of term loans shall be required from (subject to agreed exceptions) (i) 100% of the proceeds from asset sales by the Company and its subsidiaries, (ii) 100% of the net proceeds from issuances of debt and equity by the Company and its subsidiaries, and (iii) 100% of the net proceeds from insurance recovery and condemnation events of the Company and its subsidiaries.

The senior secured credit facility contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or ~~disposition~~dispositions of property or assets, investments (including loans, advances, guarantees and acquisitions), ~~transaction~~transactions with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Company is required to comply with a ~~total~~consolidated leverage ratio and ~~fixed charge~~consolidated interest coverage ratio.

●

The senior secured credit facility contains customary events of default, including cross-default to other material agreements, judgment default and change of control.

~~INFORMATION SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)~~

~~(tabular amounts in thousands, except per share data)~~

~~(unaudited)~~

~~On February 10, 2017,~~The Company’s financial statements include outstanding borrowings of $79.2 million both as required by the 2016 Credit Agreement, the Company entered into an agreement to cap the interest rate at 4% on the LIBOR component of its borrowings under the term loan facility until December 31, 2019. This interest rate cap was not designated for hedging or speculative purposes. The expense related to this interest rate cap was not material.

As of September 30, ~~2017,~~2023 and December 31, 2022, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the ~~total principal~~fair value hierarchy. The fair value of the Company’s outstanding ~~under the term loan facility and revolving credit facility~~borrowings was ~~$105.9~~approximately $79.9 million and $76.5 million as of September 30, 2023 and December 31, 2022, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company’s incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows was 7.0% and 6.3% as of September 30, 2023 and December 31, 2022, respectively. The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates. In the third quarter of 2023, the Company borrowed $5.0 million ~~respectively.~~against the revolver and subsequently repaid $5.0 million during the quarter. The Company is currently in compliance with its financial covenants.

~~Compass Convertible Notes~~

NOTE 11—SUBSEQUENT EVENTS

On ~~January 4, 2011, as part~~October 31, 2023, a subsidiary of the ~~consideration for~~Company executed an Asset Purchase Agreement with Ventana Research, Inc. and consummated the acquisition of ~~Compass, we issued an aggregate~~substantially all assets, and assumed certain liabilities, of ~~$6.3~~Ventana Research, Inc. The purchase price was comprised of $1.0 million ~~in convertible notes~~of cash consideration paid at closing. Ventana Research, Inc. will also have the right to ~~Compass (the “Compass Notes”). The Compass Notes mature on January 4, 2018 and interest is payable on~~receive additional consideration paid via earn-out payments during the ~~outstanding principal amount, computed daily, at~~next 26 months, if certain financial targets are met.

On November 1, 2023, the ~~rate~~Board approved a fourth-quarter dividend of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Compass Notes. The Compass Notes were subject to transfer restrictions until January 31, 2013. If the price of our common stock on the Nasdaq Global Market exceeds $4$0.045 per share, ~~for 60 consecutive trading days (the “Trigger Event”), the holder~~payable December 20, 2023, to shareholders of ~~the Compass Notes may convert all (but not less than all)~~record as of the outstanding principal amount of the Compass Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, we may prepay all or any portion of the outstanding principal amount of the Compass Notes by giving the holder 30 days written notice. On March 21, 2014, the Trigger Event occurred. As a result, a holder of the Compass Notes may convert all (but not less than all) of the outstanding principal amount of the Compass Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. In addition, ISG may elect to prepay all or any portion of the outstanding principal amount of the Compass Notes by giving a holder 30 days written notice; however, such holder shall be given the opportunity to convert the outstanding principal amount into shares as described above. No holder of the Compass Notes has the option to require cash payment as a result of the Trigger Event.December 5, 2023.

In 2013 and 2016, we prepaid substantial portions of the outstanding principal amount of the Compass Notes. As of September 30, 2017, the total principal outstanding under the remaining Compass Notes was $0.2 million.

~~Alsbridge Notes~~

On December 1, 2016, as part of the merger consideration for the acquisition of Alsbridge, we issued an aggregate of $7.0 million in unsecured subordinated promissory notes (the “Alsbridge Notes”). The Alsbridge Notes mature on September 1, 2018 and interest accrues on the principal amount daily at a rate of 2.0% and is payable upon maturity. At any time, the Company may at its option prepay all or any portion of Alsbridge Notes. As of September 30, 2017, the total principal outstanding under the Alsbridge Notes was $7.0 million.

1314

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements by terminology, such as “may,” “should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast” and similar expressions (or the negative of such ~~expressions.)~~expressions). Forward-looking statements include statements concerning ~~2017~~2023 revenue growth rates and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price, ~~and~~ current competitive ~~conditions.~~conditions and the impact of COVID-19. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that the Company faces, see the discussion in our ~~2016~~2022 Annual Report on Form 10-K titled “Risk Factors” and in this Quarterly Report on Form 10-Q under Item 1A of Part II, “Risk Factors.”

BUSINESS OVERVIEW

Information Services Group, Inc. ~~(“ISG”~~(Nasdaq: III) (the “Company,” “ISG,” “we,” “us” or “our”) ~~(NASDAQ: III)~~ is a leading global technology ~~insights, market intelligence~~research and advisory ~~services company serving~~firm. A trusted business partner to over 900 clients, including more than ~~700 clients around~~75 of the ~~world~~top 100 enterprises in our markets, ISG is committed to ~~help them~~helping corporations, public sector organizations and service and technology providers achieve operational excellence and faster growth. ~~ISG~~The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. ~~ISG supports both private~~Founded in 2006, and public sector organizations to transform and optimize their operational environments. Clients look to ISG for unique insights and innovative solutions for leveraging technology, our deep data source, and more than five decades of experience of global leadership in information and advisory services. Basedbased in Stamford, Connecticut, ISG employs approximately 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise and world-class research and analytical capabilities based on the ~~Company has approximately 1,300 employees~~industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com. The information on or accessible through our website is not part of and ~~operates~~is not incorporated by reference into this Quarterly Report on Form 10-Q, and the inclusion of our website address in ~~over 20 countries.~~

this Quarterly Report on Form 10-Q is only for reference.

Our strategy is to strengthen our existing market position and develop new services and products to support future growth plans. As a result, we are focused on growing our existing service model, expanding geographically, developing new industry sectors, productizing market data assets, expanding our managed services offerings and growing via acquisitions. Although we do not expect any adverse conditions that will impact our ability to execute against our strategy over the next twelve months, the more significant factors that could limit our ability to grow in these areas include global macro-economic conditions and the impact on the overall sourcing market, competition, our ability to retain advisors and reductions in discretionary spending with our top ~~strategic~~client accounts or other significant client events. Other areas that ~~could~~may impact the business ~~would also~~ include natural disasters, pandemics, such as COVID-19, wars, legislative and regulatory changes and capital market disruptions.

We principally derive ~~our~~ revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and ~~reimbursable expenses~~the level of client involvement. Revenues for ~~professional services. A portion of our revenues~~services rendered are ~~generated under hourly or daily rates billed~~recognized on a time and ~~expense basis. Clients are typically invoiced~~materials basis or on a ~~monthly~~fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for revenue recognition.

Revenues for time and materials contracts are recognized asbased on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are ~~provided. There~~performed. Revenues for time and materials contracts are ~~also client engagements~~billed monthly, semimonthly or in ~~which we are paid a fixed amount for our services, often referred to as fixed fee billings. This may be one single amount covering~~accordance with the ~~whole engagement or several amounts for various phases, milestones or functions. We also earn incremental revenues, in addition to hourly or fixed fee billings, which are contingent on the attainment~~specific contractual terms of ~~certain contractual milestones or objectives. Such revenues may cause unusual variations in quarterly revenues and operating results.~~ each project.

We also derive our revenues from certain recurring revenue streams. ~~This includes Managed Services,~~These include such annuity-based ISG offerings as ISG GovernX, Research, ~~the U.S.~~Software as a Subscription (Automation licenses), ISG Inform and multi-year Public Sector ~~subscription services around Robotic Process Automation (“RPA”) and analytic benchmarking. All~~contracts. These offerings are characterized by subscriptions (i.e., ~~renewal centric~~renewal-centric as opposed to ~~project centric~~project-centric revenue streams) or, in some instances, multi-year contracts. Our digital services now span a volume of offerings and have

become embedded as part of even our traditional transaction services. Digital enablement provides capabilities, digital insights and better engagement with clients and partners. ~~Our digital offerings expanded in 2017 to include RPA.~~

Our results are impacted principally by our ~~full time~~full-time consultants’ utilization rate, the number of business days in each quarter and the number of our ~~revenue generating~~revenue-generating professionals who are available to work. Our utilization rate can be negatively affected by increased hiring because there is generally a transition period for new professionals that ~~results~~result in a temporary drop in our utilization rate. Our utilization rate can also be affected by seasonal variations in the demand for our services from our clients. The number of business ~~work days~~workdays is also affected by the number of vacation days taken by our consultants and holidays in each quarter. We typically have fewer business ~~work days~~workdays available in the fourth quarter of the year, which can impact revenues during that period. ~~Time and expense~~Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. The volume of work performed for any particular client can vary widely from period to period.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 AND SEPTEMBER 30, ~~2016~~2022

Revenues

Revenues are generally derived from engagements priced on a time and materials basis as well as various fixed fee projects, and are recorded based on actual time worked and are recognized as the services are performed. Revenues related to materials (mainly out-of-pocket expenses such as airfare, lodging and meals) required during an engagement generally do not include a profit mark-up and can be charged and reimbursed discretely or as part of the overall fee structure. Invoices are issued to clients at least monthly.

We operate as one reportable segment, fact-based sourcing advisory services. We operate principally in the Americas, Europe, and Asia Pacific. Our foreign operations are subject to local government regulations and to the uncertainties of the economic and political conditions of those areas.

Geographical revenue information for the segment is as follows:


	Three Months Ended September 30,
							Percent

									Three Months Ended September 30,
																Percent
Geographic Area	2017		2016		Change		Change		2023		2022		Change		Change
	(in thousands)















									(in thousands)
Americas	$	41,524	$	29,239	$	12,285	42	%	$	42,469	$	42,174	$	295		1	%
Europe		19,732		16,611		3,121	19	%		22,090		19,321		2,769		14	%
Asia Pacific		7,093		6,079		1,014	17	%		7,214		7,341		(127)		(2)	%
Total revenues	$	68,349	$	51,929	$	16,420	32	%	$	71,773	$	68,836	$	2,937		4	%

Revenues increased ~~$16.4~~$2.9 million, or approximately ~~32% in 2017.~~4%, for the third quarter of 2023. The increase in ~~revenues in~~revenue for the Americas ~~and Europe regions~~ was primarily attributable to ~~higher levels of sourcing activity~~an increase in our ~~Consulting line of~~Advisory and Automation service ~~due to the Alsbridge acquisition and increased sourcing revenue~~lines, partially offset by a decrease in ~~Germany.~~our Network & Software Advisory Services (NaSa) service line. The increase in ~~revenues~~revenue in ~~the Asia Pacific region~~Europe was primarily attributable to ~~higher levels of sourcing activity~~an increase in our ~~Consulting line~~Automation and Research service lines, partially offset by a decrease in our Advisory service line. The revenue decrease in Asia Pacific was primarily attributable to a decrease in our GovernX and NaSa service lines, partially offset by an increase in our Advisory service line. The translation of ~~service.~~foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $1.4 million.

Operating Expenses

The following table presents a breakdown of our operating expenses by category:


	Three Months Ended September 30,
							Percent

									Three Months Ended September 30,
															Percent
Operating Expenses	2017		2016		Change		Change		2023		2022		Change		Change
	(in thousands)















									(in thousands)
Direct costs and expenses for advisors	$	38,214	$	30,959	$	7,255	23	%	$	43,032	$	39,786	$	3,246		8	%
Selling, general and administrative		23,710		16,613		7,097	43	%		20,992		20,334		658		3	%
Depreciation and amortization		2,951		1,741		1,210	70	%		1,526		1,286		240		19	%
Total operating expenses	$	64,875	$	49,313	$	15,562	32	%	$	65,550	$	61,406	$	4,144		7	%

Total operating expenses increased ~~$15.6~~$4.1 million, or approximately 7%, for the third quarter ~~with increases~~of 2023. The increase in ~~selling, general and administrative (“SG&A”)~~operating expenses ~~direct expenses and depreciation and amortization. The increases were~~was primarily due ~~primarily~~ to higher ~~compensation and benefits, bad debts and travel expenses due to the acquisition~~license fees of ~~Alsbridge. We also recorded $0.4~~$2.5 million, in contract labor expense of $1.2 million,

severance and integration ~~related expenses~~ and ~~$0.5~~other expense of $0.7 million, ~~related to the reversal~~and computer expense of a tax indemnity receivable established with an unrealized tax benefit liability at the time of the acquisition of Alsbridge, which are included in selling, general and administrative expense. The associated unrealized tax benefit liability was also reversed and recorded as a reduction in the tax provision.$0.2 million. These ~~cost increases~~costs were partially offset by ~~decreases in contract labor and occupancy expenses.~~ lower compensation expense of $0.8 million.

Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and ~~profit sharing~~profit-sharing plan contributions. A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities. Bonus compensation is determined based on achievement against Company financial ~~and individual~~ targets and is accrued monthly throughout the year based on management’s estimates of target achievement. Statutory and elective ~~profit sharing~~profit-sharing plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers compensation and disability insurance.

Sales and marketing costs consist principally of compensation ~~expense~~expenses related to business development, proposal preparation and delivery and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and business intelligence activities. The Company maintains a dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the ISG Index and assembling proposals.

We maintain a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and development of project management skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary methodologies and tools and the systems that support them.

General and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to general management activities, IT infrastructure and costs for ~~the~~ finance, accounting, information technology and human resource functions. General and administrative costs also reflect continued investment associated with implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises or work remotely, all occupancy expenses are recorded as general and administrative.

Depreciation and amortization expense in the third quarter of ~~2017~~2023 and ~~2016~~2022 was ~~$2.9~~$1.5 million and ~~$1.7~~$1.3 million, respectively. The increase of ~~$1.2~~$0.2 million in depreciation and amortization expense was primarily due to the acquisition of ~~Alsbridge.~~Change 4 Growth. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software,

system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions is not amortized, but is subject to annual impairment ~~testing.~~testing and interim impairment tests, if triggering events are identified.

Other Income (Expense), Net

The following table presents a breakdown of other income (expense), net:


	Three Months Ended September 30,
							Percent
Other income (expense), net	2023		2022		Change		Change

	(in thousands)
Interest income	$	104	$	37	$	67	181	%
Interest expense		(1,533)		(824)		(709)	(86)	%
Foreign currency transaction gain		(2)		131		(133)	(102)	%
Total other income (expense), net	$	(1,431)	$	(656)	$	(775)	(118)	%

Three Months Ended September 30,

Percent


2017

2016

Change

Change

(in thousands)

Interest income

$
15

$
—

$
15

N/A
%

Interest expense

(1,716)

(596)

(1,120)

(188)
%

Foreign currency loss

(111)

(38)

(73)

(192)
%

Total other (expense), net

$
(1,812)

$
(634)

$
(1,178)

(186)
%

The total increase in other expenses of ~~$1.2~~$0.8 million was primarily the result of higher interest ~~expense due~~expenses attributable to ~~an increase in~~higher interest rates and our higher debt ~~balances and an increase of $0.1 million of foreign currency losses.~~balance.

Income Tax Expense

Our quarterly effective tax rate varies from period to period based on the mix of our earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the ~~three months~~quarter ended September 30, ~~2017~~2023 was ~~14.1%~~33.2% compared to ~~61.9%~~18.0% for the ~~three months~~quarter ended September 30, ~~2016.~~2022. The difference for the quarter ended September 30, 2023 was primarily due to the ~~partial release~~impact of ~~liability accrued for previously unrecognized tax benefits~~earnings and losses in certain foreign jurisdictions and the impact of ~~current quarter earnings in jurisdictions where~~ the ~~Company is currently precluded from booking a~~vesting of restricted stock units. The Company’s effective tax ~~provision~~rate for the ~~three months~~quarter ended September 30, ~~2017.~~2023 was higher than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves or valuation allowances during the quarter ended September 30, 2023.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 AND SEPTEMBER 30, ~~2016~~2022

Revenues

Geographical revenue information for the segment is as follows:


	Nine Months Ended September 30,

									Nine Months Ended September 30,
															Percent
Geographic Area							Percent		2023		2022		Change		Change
	2017		2016		Change		Change
	(in thousands)












									(in thousands)
Americas	$	122,581	$	86,832	$	35,749	41	%	$	133,149	$	123,059	$	10,090	8	%
Europe		61,443		56,885		4,558	8	%		69,496		66,039		3,457	5	%
Asia Pacific		18,918		18,495		423	2	%		22,223		23,002		(779)	(3)	%
Total revenues	$	202,942	$	162,212	$	40,730	25	%	$	224,868	$	212,100	$	12,768	6	%

Revenues increased ~~$40.7~~$12.8 million, or approximately ~~25% in 2017.~~6%, for the nine months ended September 30, 2023. The increase in ~~revenues~~revenue in the Americas ~~region~~ was primarily attributable to ~~higher levels of sourcing activity~~an increase in ~~Consulting, primarily associated with the acquisitions of TracePoint~~our Advisory and ~~Alsbridge.~~Automation service lines. The increase in ~~the~~revenue in Europe ~~region~~was primarily attributable to an increase in our Automation and Research service lines, partially offset by a decrease in our Advisory service line. The decrease in revenue in Asia Pacific was primarily attributable to a ~~higher level of sourcing activity~~decrease in our ~~Consulting~~Advisory service line, ~~of business, primarily associated with the acquisition of Alsbridge and increased sourcing revenue in Germany. The~~being partially offset by an increase in our GovernX service line. The translation of foreign currency revenues into U.S. dollars negatively impacted performance in ~~the~~Europe and Asia Pacific ~~region was primarily attributable~~compared to ~~higher levels of Consulting and Managed Services.~~the prior year by $0.8 million.

Operating Expenses

The following table presents a breakdown of our operating expenses by category:


	Nine Months Ended September 30,
							Percent
Operating Expenses	2023		2022		Change		Change

	(in thousands)
Direct costs and expenses for advisors	$	138,048	$	125,111	$	12,937	10	%
Selling, general and administrative		63,992		60,806		3,186	5	%
Depreciation and amortization		4,692		3,872		820	21	%
Total operating expenses	$	206,732	$	189,789	$	16,943	9	%

Nine Months Ended September 30,

Operating Expenses

Percent


2017

2016

Change

Change



(in thousands)

Direct costs and expenses for advisors

$
119,153

$
98,433

$
20,720

21
%

Selling, general and administrative

68,815

52,428

16,387

31
%

Depreciation and amortization

9,773

5,386

4,387

81
%

Total operating expenses

$
197,741

$
156,247

$
41,494

27
%

Total operating expenses increased ~~$41.5~~$16.9 million, or approximately 9%, for ~~2017 with increases~~the nine months ended September 30, 2023. The increase in ~~SG&A~~operating expenses ~~direct expenses and depreciation and amortization. The increases were~~was primarily due ~~primarily~~ to higher contract labor expense of $5.9 million, license fees of $5.3 million, severance and integration and other expenses of $1.6 million, travel and entertainment expenses of $1.5 million, non-cash compensation of $1.3 million, and computer expenses of $0.8 million. These costs were partially offset by lower compensation expenses of $1.0 million.

Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits ~~travel, information technology, marketing, interest on contingent consideration, stock~~and profit-sharing plan contributions. A portion of compensation ~~expense~~expenses for certain billable employees are allocated between direct costs and ~~bad debt expenses. We recorded $5.4 million of stock compensation expense, included in~~ selling, general and administrative ~~expense, compared~~costs based on relative time spent between billable and non-billable activities. Bonus compensation is determined based on achievement against Company financial and individual targets and is accrued monthly throughout the year based on management’s estimates of target achievement. Statutory and elective profit-sharing plans are offered to ~~$5.2 million in 2016. During the second quarter~~employees as appropriate. Direct costs also include employee taxes, health insurance, workers compensation and disability insurance.

Sales and marketing costs consist principally of ~~2017, we recorded $0.6 million for the loss on the sublease~~compensation expenses related to business development, proposal preparation and delivery and negotiation of ~~Alsbridge’s headquarters office. During the first nine months of 2017, we recorded $1.5 million in severance and integration related expenses. The increases were~~new client contracts. Costs also ~~due~~include travel expenses relating to the ~~acquisitions~~pursuit of ~~TracePoint, Experton~~sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and ~~Alsbridge.~~ business intelligence activities. The Company maintains a dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the ISG Index and assembling proposals.

We ~~also recorded $0.5 million~~maintain a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and development of project management skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary methodologies and tools and the systems that support them.

General and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to ~~the reversal of a tax indemnity receivable established~~general management activities, IT infrastructure and costs for finance, accounting, information technology and human resource functions. General and administrative costs also reflect continued investment associated with ~~an unrealized tax benefit liability at the time of the acquisition of Alsbridge. The associated unrealized tax benefit liability was also reversed~~implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises or work remotely, all occupancy expenses are recorded as a reduction in the tax provision. These cost increases were partially offset by decreases in professional fees from our service providers. SG&A costs in 2016 also included $0.4 million in transaction costs associated with our stock repurchase in April 2016 conducted through a modified “Dutch” auction.general and administrative.

Depreciation and amortization expense in ~~2017~~the nine months ended September 30, 2023 and ~~2016~~2022 was ~~$9.8~~$4.7 million and ~~$5.4~~$3.9 million, respectively. The increase of ~~$4.4~~$0.8 million ~~in depreciation and amortization expense~~ was primarily due to the acquisition of Change 4 Growth. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions ~~of TracePoint, Experton~~is not amortized but is subject to annual impairment testing and ~~Alsbridge.~~interim impairment tests, if triggering events are identified.

Other Income (Expense), Net

The following table presents a breakdown of other income (expense), net:


									Nine Months Ended September 30,
															Percent
Other income (expense), net									2023		2022		Change		Change

	Nine Months Ended September 30,
							Percent
	2017		2016		Change		Change
	(in thousands)












									(in thousands)
Interest income	$	94	$	24	$	70	292	%	$	285	$	126	$	159	126	%
Interest expense		(5,132)		(1,590)		(3,542)	(223)	%		(4,676)		(1,997)		(2,679)	(134)	%
Foreign currency loss		(292)		(300)		8	3	%
Total other (expense), net	$	(5,330)	$	(1,866)	$	(3,464)	(186)	%
Foreign currency transaction (loss) gain										(40)		248		(288)	(116)	%
Total other income (expense), net									$	(4,431)	$	(1,623)	$	(2,808)	(173)	%

The total increase in other expenses of ~~$3.5~~$2.8 million was primarily the result of higher interest ~~expense due~~expenses attributable to ~~an increase in~~higher interest rates, ~~and~~our higher debt ~~balances.~~balance and $0.4 million associated with the write-off of deferred financing costs.

Income Tax Expense

Our quarterly effective tax rate varies from period to period based on our mix of earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the nine months ended September 30, ~~2017~~2023 was ~~527.9%~~34.1% compared to ~~56.9%~~25.4% for the nine months ended September 30, ~~2016.~~2022. The difference for the nine months ended September 30, 2023 was primarily due to the impact of ~~current~~ earnings and losses in certain foreign jurisdictions and the impact of the vesting of restricted stock units. The Company’s effective tax rate for the nine months ended September 30, ~~2017~~2023 was higher than the statutory rate primarily due to non-deductible expenses and the impact of foreign operations. There were no significant changes in ~~jurisdictions where~~uncertain tax position reserves or valuation allowances during the ~~Company is currently precluded from booking a tax provision for the~~

nine months ended September 30, ~~2017 and the partial release of liability accrued for previously unrecognized tax benefits during the quarter ended September 30, 2017.~~2023.

NON-GAAP FINANCIAL PRESENTATION

This management’s discussion and analysis presents supplemental measures of our performance that are derived from our consolidated financial information but are not presented in accordance with ~~accounting principles generally accepted in the United States of America (“GAAP”).~~GAAP. We refer to these financial measures, which are considered “non-GAAP financial measures” under SEC rules, as adjusted EBITDA, adjusted net income and adjusted ~~earnings~~net income per diluted share, each as defined below. See “Non-GAAP Financial Measures” below for information about our use of these non-GAAP financial measures, including our reasons for including these measures and reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial measures to supplement the financial information presented on a GAAP basis. We provide adjusted EBITDA (defined as net income ~~before net income attributable to non-controlling interest~~ plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, ~~impairment charges for goodwill and intangible assets,~~ interest onaccretion associated with contingent consideration, acquisition-related costs, and severance, integration and ~~integration expense, tax indemnity receivable, and bargain purchase gain)~~other expense), adjusted net income (defined as net income, plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, ~~non-cash impairment charges for goodwill and intangible assets,~~ interest onaccretion associated with contingent consideration, acquisition-related costs, severance, integration and ~~integration~~other expense and ~~bargain purchase gain,~~write-off of deferred financing costs, on a tax-adjusted basis) and adjusted net income ~~as earnings~~ per diluted share, excluding the net of tax effect of the items set forth in the table below. These are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations ~~which~~that management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by the Company to evaluate the Company’s business strategies and management’s performance. These non-GAAP financial measures exclude non-cash and certain other special charges that many investors believe may obscure the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. We believe that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance.

Three Months Ended September 30,

Nine Months Ended September 30,


2017

2016


2017

2016



(in thousands)

Net income attributable to ISG

$
1,428

$
732


$
520

$
1,645

Net income attributable to non-controlling interest

—

24

32

123

Interest expense (net of interest income)

1,701

596

5,038

1,566

Income taxes

234

1,226

(681)

2,331

Depreciation and amortization

2,951

1,741

9,773

5,386

Interest on contingent consideration

415

373

1,108

433

Acquisition-related costs(1)

89

—

1,186

—

Severance and integration expense

356

—

1,514

—

Tax indemnity receivable

454

—

454

—

Foreign currency transaction

111

38

292

300

Non-cash stock compensation

1,873

1,865

5,383

5,180

Adjusted EBITDA

$
9,612

$
6,595

$
24,619

$
16,964

1920


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(in thousands)
Net income	$	3,201	$	5,556	$	9,025	$	15,443
Plus:
Interest expense (net of interest income)		1,429		787		4,391		1,871
Income taxes		1,591		1,218		4,680		5,245
Depreciation and amortization		1,526		1,286		4,692		3,872
Interest accretion associated with contingent consideration		26		—		77		8
Acquisition-related costs ⁽¹⁾		99		25		99		41
Severance, integration and other expense		674		8		2,016		458
Foreign currency transaction loss (gain)		2		(131)		40		(248)
Non-cash stock compensation		2,098		1,987		6,752		5,432
Adjusted EBITDA	$	10,646	$	10,736	$	31,772	$	32,122


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(in thousands)
Net income	$	3,201	$	5,556	$	9,025	$	15,443
Plus:
Non-cash stock compensation		2,098		1,987		6,752		5,432
Intangible amortization		769		525		2,352		1,580
Interest accretion associated with contingent consideration		26		—		77		8
Acquisition-related costs ⁽¹⁾		99		25		99		41
Severance, integration and other expense		674		8		2,016		458
Write-off of deferred financing costs		—		—		379		—
Foreign currency transaction loss (gain)		2		(131)		40		(248)
Tax effect ⁽²⁾		(1,174)		(772)		(3,749)		(2,327)
Adjusted net income	$	5,695	$	7,198	$	16,991	$	20,387


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income per diluted share	$	0.06	$	0.11	$	0.18	$	0.30
Non-cash stock compensation		0.04		0.04		0.13		0.11
Intangible amortization		0.02		0.01		0.05		0.03
Interest accretion associated with contingent consideration		0.00		0.00		0.00		0.00
Acquisition-related costs ⁽¹⁾		0.00		0.00		0.00		0.00
Severance, integration and other expense		0.01		0.00		0.04		0.01
Write-off of deferred financing costs		-		-		0.01		-
Foreign currency transaction loss (gain)		0.00		(0.00)		-		(0.00)
Tax effect ⁽²⁾		(0.02)		(0.02)		(0.07)		(0.05)
Adjusted net income per diluted share	$	0.11	$	0.14	$	0.34	$	0.40

Three Months Ended

Nine Months Ended

September 30,

September 30,



2017

2016

2017

2016

(in thousands)

Net income attributable to ISG

$
1,428

$
732

$
520

$
1,645

Non-cash stock compensation

1,873

1,865

5,383

5,180

Intangible amortization

2,382

1,392

7,133

4,049

Interest on contingent consideration

415

373

1,108

433

Acquisition-related costs(1)

89

—

1,186

—

Severance and integration expense

356

—

1,514

—

Foreign currency transaction

111

38

292

300

Tax effect (2)

(1,986)

(1,394)

(6,314)

(3,786)

Adjusted net income

$
4,668

$
3,006

$
10,822

$
7,821

Three Months Ended

Nine Months Ended

September 30,

September 30,




2017

2016

2017

2016

Net income per diluted share attributable to ISG

$
0.03

$
0.02

$
0.01

$
0.05

Non-cash stock compensation

0.04

0.05

0.12

0.14

Intangible amortization

0.05

0.04

0.16

0.11

Interest on contingent consideration

0.01

0.01

0.03

0.01

Acquisition-related costs(1)

0.00

—

0.03

—

Severance and integration expense

0.01

—

0.03

—

Foreign currency transaction

0.00

0.00

0.01

0.01

Tax effect(2)

(0.04)

(0.04)

(0.14)

(0.11)

Adjusted net income per diluted share

$
0.10

$
0.08

$
0.25

$
0.21

(1)

~~(1)~~

Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition ~~deferred revenues.~~

contract liabilities.

(2)

~~(2)~~

Marginal tax rate of ~~38% applied.~~

32%, reflecting U.S. federal income tax rate of 21% plus 11% attributable to U.S. states and foreign jurisdictions.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary sources of liquidity are cash flows from operations, existing cash and cash equivalents and our revolving credit facility. Operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable, accrued expenses and accrued payroll and related benefits. The volume of billings and timing of collections and payments affect these account balances.

As of September 30, ~~2017,~~2023, our cash, ~~and~~ cash equivalents and restricted cash were ~~$22.2~~$18.8 million compared to $30.7 million as of December 31, 2022, a net decrease of ~~$12.3~~$11.9 million, ~~from December 31, 2016,~~ which was primarily attributable to the following:

●

·repayment of outstanding debt of $84.2 million;

●

net cash provided by operating activities of ~~$3.3~~$2.6 million;

●

~~payments~~cash dividends paid to shareholders of ~~principal amounts due on the debt under our Credit Agreement of $7.2~~$6.5 million;

●

payments related to debt financing costs of ~~contingent consideration of $2.7~~$0.8 million;

●

~~capital expenditures for~~purchase of furniture, fixtures and equipment of ~~$2.3~~$1.6 million;

●

~~equity repurchases~~treasury shares repurchased of ~~$2.9~~$2.0 million;

●

~~payment to the minority holder of ISG Italia S.p.A. for non-controlling interest of $0.9 million;~~

payments ~~of $2.2 million~~ related to tax withholding for stock-based ~~compensation; and~~

compensation of $2.5 million;

●

~~installment~~ payment of contingent consideration for ~~the acquisition~~Change 4 Growth of ~~Experton of $0.5 million.~~

$1.5 million;

●

proceeds from revolving facility of $84.2 million; and

●

proceeds from issuance of employees stock purchase plan shares of $0.7 million.

Capital Resources

On ~~December 1, 2016,~~February 22, 2023, the Company ~~entered into an~~ amended and restated ~~senior secured credit facility (the “2016 Credit Agreement”) comprised of a $110.0 million term facility and a $30.0 million revolving facility, amending and restating~~ its senior secured credit facility ~~originally entered into on May 3, 2013.~~to increase the revolving commitments per the revolving facility from $54.0 million to $140.0 million and eliminate its term loan. The material terms ofunder the ~~2016~~2023 Credit Agreement are as ~~follows:~~follows. Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:

●

~~Each of the term loan facility and~~The revolving credit facility has a maturity date of ~~December 1, 2021 (the “Maturity Date”).~~

February 22, 2028.

●

The Company’s direct and indirect existing and future ~~wholly-owned~~wholly owned domestic subsidiaries serve as guarantors to the Company’s obligations under the senior secured facility.

●

relevant interest period plus a credit spread adjustment of 0.10%) as determined by the ~~Administrative Agent,~~administrative agent, plus the applicable margin. The applicable margin is adjusted quarterly based upon the Company’s ~~quarterly~~consolidated leverage ratio. Prior to the end of the first ~~full quarter~~quarter-end following the closing of the credit facility, the applicable margin shall be a percentage per annum equal to ~~2.5%~~0.50% for ~~the term loans and~~ the revolving loans maintained as Base Rate loans or ~~3.5%~~1.50% for the ~~term loans and~~ revolving loans maintained as ~~Eurodollar~~Term SOFR loans.

●

pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Company is required to comply with a ~~total~~consolidated leverage ratio and ~~fixed charge~~consolidated interest coverage ratio.

●

The senior secured credit facility contains customary events of default, including cross-default to other material agreements, judgment default and change of control.

As of September 30, ~~2017,~~2023 and December 31, 2022, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the ~~total principal~~fair value hierarchy. The fair value of the Company's outstanding ~~under the term loan facility and revolving credit facility~~borrowings was ~~$105.9~~approximately $79.9 million and $76.5 million as of September 30, 2023 and December 31, 2022, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company’s incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows was 7.0% and 6.3% as of September 30, 2023 and December 31, 2022, respectively. The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates. In the third quarter of 2023, the Company borrowed $5.0 million ~~respectively.~~against the revolver and subsequently repaid $5.0 million during the quarter. The Company is currently in compliance with its financial covenants.

~~Compass Convertible Notes~~

~~On January 4, 2011, as part~~We anticipate that our current cash and the ongoing cash flows from our operations will be adequate to meet our working capital, capital expenditure and debt financing needs for at least the next twelve months. The anticipated cash needs of ~~the consideration for the acquisition of Compass,~~our business could change significantly if we ~~issued an aggregate of $6.3 million in convertible notes to Compass (the “Compass Notes”). The Compass Notes mature on January 4, 2018~~pursue and ~~interest is payable~~complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated or if other unexpected circumstances arise that may have a material effect on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Compass Notes. The Compass Notes were subject to transfer restrictions until January 31, 2013. If the pricecash flow or profitability of our business. If we require additional capital resources to grow our business, either internally or through acquisition, or to maintain liquidity, we may seek to sell additional equity securities or to secure additional debt financing. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future.

Dividend Program

In May 2023, the Company announced it will pay a quarterly dividend of $0.045 per share of common ~~stock on the Nasdaq Global Market exceeds $4~~stock. The Company expects to pay a total cash dividend of $0.18 per share for ~~60 consecutive trading days (the “Trigger Event”),~~ the ~~holder~~four quarters ending June 30, 2024. On August 1, 2023, the Board approved a third-quarter dividend of $0.045 per share, which was paid on September 28, 2023, to shareholders of record as of September 6, 2023. On November 1, 2023, the Board of Directors of the ~~Compass Notes may convert all (but not less than all)~~Company (the “Board”) approved a fourth-quarter dividend of ~~the outstanding principal amount~~$0.045 per share, payable December 20, 2023, to shareholders of ~~the Compass Notes into shares~~record as of ~~our common stock at the rate of 1 share~~December 5, 2023. The dividends are accounted for every $4 in principal amount outstanding. After the Trigger Event, we may prepay all or any portion of the outstanding principal amount of the Compass Notes by giving the holder 30 days written notice. On March 21, 2014, the Trigger Event occurred. As a result, a holder of the Compass Notes may convert all (but not less than all) of the outstanding principal amount of the Compass Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. In addition, ISG may elect to prepay all or any portion of the outstanding principal amount of the Compass Notes by giving a holder 30 days written notice; however, such holder shall be given the opportunity to convert the outstanding principal amount into shares as described above. No holder of the Compass Notes has the option to require cash payment as a ~~result of~~decrease to Stockholders’ Equity. All future dividends will be subject to the ~~Trigger Event.~~Board’s approval.

~~Alsbridge Notes~~

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Recently Issued Accounting Pronouncements

See Note 3 to our condensed consolidated financial statements included elsewhere in this report.

Critical Accounting Policies and Accounting Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements. We prepare these financial statements in conformity with ~~U.S. generally accepted accounting principles.~~GAAP. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an ~~on-going~~ongoing basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

We are exposed to financial market risks primarily related to changes in interest rates associated with our borrowing and investing activities. A 100 basis point change in interest rates would result in an annual change in the results of operations of $1.1 million pre-tax.

~~Foreign Currency Risk~~

We operate in a number of international areas which exposes us to foreign currency exchange rate risk. We have significant international revenue, which is predominantly collected in local currency. From time to time, when feasible, we also economically hedge our exposure to changes in foreign exchange rates principally with forward contracts. These contracts are marked-to-market with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and liabilities being hedged. As of September 30, ~~2017,~~2023, the Company had $79.2 million in total debt principal outstanding. Note 10 — Financing Arrangements and Long-Term Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations.

All of the Company’s total debt outstanding as of September 30, 2023 was based on a floating base rate (SOFR – Secured Overnight Financing Rate) of interest, which potentially exposes the Company to increases in interest rates. However, due to our debt to EBITDA ratio of 1.8 times and forecasted rates from external banks, we ~~have no outstanding forward exchange contracts or other derivative instruments for hedging or speculative purposes. It is expected~~believe that our ~~international~~total exposure is limited and is considered in our forecasted cash uses.

Foreign Currency Risk

A significant portion of our revenues ~~will continue~~are typically derived from sales outside of the United States. Among the major foreign currencies in which we conduct business are the Euro, the British Pound and the Australian dollar. The reporting currency of our condensed consolidated financial statements is the U.S. dollar. As the values of the foreign currencies in which we operate fluctuate over time relative to ~~grow~~the U.S. dollar, the Company is exposed to both foreign currency translation and transaction risk.

Translation risk arises as ~~European, Asian~~our foreign currency assets and ~~other markets adopt sourcing solutions.~~liabilities are translated into U.S. dollars because the functional currencies of our foreign operations are generally denominated in the local currency. Adjustments resulting from the translation of these assets and liabilities are deferred and recorded as a component of stockholders’ equity. In 2022, the impact of foreign currency translation on our Statement of Stockholders’ Equity was $2.7 million. The translation of our foreign currency revenues and expenses historically has not had a material impact on our consolidated earnings because movements in and among the major currencies in which we operate tend to impact our revenues and expenses fairly equally. However, our earnings could be impacted during periods of significant exchange rate volatility, or when some or all of the major currencies in which we operate move in the same direction against the U.S. dollar.

Transaction risk arises when we enter into ~~U.S. dollars, as well as~~a transaction that is denominated in a currency that may differ from the local functional currency. As these transactions are translated into the local functional currency, a gain or loss may result, which is recorded in current period earnings. In 2022, the impact on revenues from foreign currency transactions was $12.7 million, representing 4.4% of revenues. The amount is not material to our ~~costs of operating internationally, may adversely affect our business, results of operations and~~condensed consolidated financial ~~condition.~~statements.

~~We have not invested in foreign operations in highly inflationary economies; however, we may do so in future periods.~~24

Credit Risk

~~Concentrations~~Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of ~~cash and~~short-term, highly liquid investments classified as cash equivalents and accounts ~~receivable. All~~receivable and contract assets. The majority of the Company’s cash and cash equivalents are ~~on deposit in fully liquid form in high quality financial institutions. We extend~~with large investment-grade commercial banks. Accounts receivable and contract assets balances deemed to be collectible from customers have limited concentration of credit risk due to our ~~clients based on an evaluation of each client’s financial condition.~~diverse customer base and geographies.

Our 25 largest clients accounted for approximately 38% of revenue in 2016 and 49% in 2015. If one or more of our large clients terminate or significantly reduce their engagements or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, our large clients generally maintain sizable receivable balances at any given time and our ability to collect such receivables could be jeopardized if such client fails to remain a viable business.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2017,~~2023, as required by ~~the~~ Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, ~~2017.~~2023.

Internal Control Over Financial Reporting

There have ~~not~~ been ~~any~~no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

The risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022 have not materially changed.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Dividend Program

In May 2023, the Company announced it will pay a quarterly dividend of $0.045 per share of common stock. The Company expects to pay a total cash dividend of $0.18 per share for the four quarters ending June 30, 2024. On August 1, 2023, the Board approved a third-quarter dividend of $0.045 per share, which was paid on September 28, 2023, to shareholders of record as of September 6, 2023. On November 1, 2023, the Board approved a fourth-quarter dividend of $0.045 per share, payable December 20, 2023, to shareholders of record as of December 5, 2023. The dividends are accounted for as a decrease to Stockholders’ Equity. All future dividends will be subject to the Board’s approval.

Issuer Purchases of Equity Securities

On August 1, 2023, the Board approved a new share repurchase authorization of an additional $25.0 million. The new share repurchase program will take effect upon completion of the Company’s current program, which had approximately $2.7 million remaining as of October 1, 2023. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, pursuant to a Rule 10b5-1 repurchase plan or by other means in accordance with federal securities laws. The timing, the amount and the method of any repurchases will be determined by the Company’s management based on its evaluation of market conditions, capital allocation alternatives and other factors. There is no guarantee as to the number of shares that will be repurchased, and the repurchase program may be extended, suspended or discontinued at any time without notice at the Company’s discretion.

The following table details the repurchases that were made during the three months ended September 30, ~~2017.~~2023.

Total Numbers of

Approximate Dollar

Securities

Value of Securities

Total Number of

Average

Purchased

That May Yet Be

Securities

Price per

as Part of Publicly

Purchased Under

Period

Purchased

Securities

Announced Plan

The Plan

(In thousands)

(In thousands)

(In thousands)

July 1 – July 31

30

$
4.11

30

$
15,233

August 1 – August 31

—

$
—

—

$
15,233

September 1 – September 30

—

$
—

—

$
15,233


				Total Numbers of	Approximate Dollar
				Securities	Value of Securities
	Total Number of			Purchased	That May Yet Be
	Securities	Average		as Part of Publicly	Purchased Under
	Purchased	Price per		Announced Plan	The Plan
Period	(In thousands)	Securities		(In thousands)	(In thousands)

July 1 - July 31	8	$	5.36	8	$	3,573
August 1 - August 31	88	$	5.16	88	$	28,119
September 1 - September 30	84	$	5.09	84	$	27,691

ITEM 5.OTHER INFORMATION

During the three months ended September 30, 2023, none of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Exchange Act).

2426

ITEM 6.EXHIBITS

The following exhibits are filed as part of this report:

Exhibit
~~Exhibit~~ Number		Description
31.1	*	Certification of Chief Executive Officer Pursuant to SEC Rule 13a−14(a)/15d−14(a)..
31.2	*	Certification of Chief Financial Officer Pursuant to SEC Rule 13a−14(a)/15d−14(a)..
32.1	*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..
32.2	*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..
101	*	The following materials from ISG’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2017~~2023 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheet, (ii) Consolidated ~~Statements~~Statement of ~~Operations,~~Income and Comprehensive Income, (iii) Consolidated ~~Statements~~Statement of Cash Flows and (iv) the Notes to Consolidated Financial Statements.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*	Filed herewith

*~~Filed herewith.~~

SIGNATURES

~~SIGNATURES~~

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	INFORMATION SERVICES GROUP, INC.


Date: November ~~9, 2017~~3, 2023	/s/ Michael P. Connors
	Michael P. Connors, Chairman of the
	Board and Chief Executive Officer


Date: November ~~9, 2017~~3, 2023	/s/ ~~David E. Berger~~Michael A. Sherrick
	~~David E. Berger,~~Michael A. Sherrick, Executive Vice
	President and Chief Financial Officer

2627


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities
Net income	$	9,025	$	15,443
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation expense		2,340		2,292
Amortization of intangible assets		2,352		1,580
Deferred tax benefit from stock issuances		(230)		(1,248)
Write-off of deferred financing costs		379		—
Amortization of deferred financing costs		182		257
Stock-based compensation		6,752		5,432
Change in fair value of contingent consideration		77		1,420
Provisions for credit losses		432		314
Deferred tax provision		125		1,426
Changes in operating assets and liabilities:
Accounts receivable and contract assets		(12,380)		(6,763)
Prepaid expenses and other assets		(2,145)		623
Accounts payable		(4,653)		(6,853)
Contract liabilities		(370)		7
Accrued expenses and other liabilities		720		(9,335)
Net cash provided by operating activities		2,606		4,595
Cash flows from investing activities
Purchase of furniture, fixtures and equipment		(1,640)		(2,614)
Net cash used in investing activities		(1,640)		(2,614)
Cash flows from financing activities
Proceeds from revolving facility (Note 10)		84,175		—
Repayment of outstanding debt (Note 10)		(84,175)		—
Principal payments on borrowings		—		(3,225)
Proceeds from issuance of employee stock purchase plan shares		719		695
Debt financing costs		(827)		—
Payments related to tax withholding for stock-based compensation		(2,461)		(3,734)
Payment of contingent consideration		(1,460)		(1,000)
Cash dividends paid to shareholders		(6,532)		(5,448)
Treasury shares repurchased		(1,994)		(12,070)
Net cash used in financing activities		(12,555)		(24,782)
Effect of exchange rate changes on cash		(265)		(4,983)
Net decrease in cash, cash equivalents, and restricted cash		(11,854)		(27,784)
Cash, cash equivalents, and restricted cash, beginning of period		30,670		47,609
Cash, cash equivalents, and restricted cash, end of period	$	18,816	$	19,825

Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	3,798	$	1,543
Taxes, net of refunds	$	6,848	$	10,761

Non-cash investing and financing activities:
Issuance of treasury stock for vested restricted stock units	$	7,554	$	9,713


	September 30,		December 31,
	2017		2016
ASSETS
Current assets
Cash and cash equivalents	$	22,227	$	34,485
Accounts and unbilled receivables, net of allowance of $615 and $494, respectively		74,796		64,662
Deferred tax asset		—		1,730
Prepaid expense and other current assets		4,523		5,374
Total current assets		101,546		106,251
Restricted cash		92		497
Furniture, fixtures and equipment, net		4,603		4,789
Goodwill		85,602		85,940
Intangible assets, net		28,065		35,113
Other assets		4,889		2,532
Total assets	$	224,797	$	235,122
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	8,267	$	9,724
Current maturities of long-term debt		14,815		5,546
Deferred revenue		8,196		9,112
Accrued expenses		22,527		27,971
Total current liabilities		53,805		52,353
Long-term debt, net of current maturities		100,707		116,485
Deferred tax liability		—		396
Other liabilities		6,516		7,476
Total liabilities		161,028		176,710
Commitments and contingencies (Note 6)
Redeemable non-controlling interest		—		1,376
Stockholders’ equity
Preferred stock, $.001 par value; 10,000 shares authorized; none issued		—		—
Common stock, $.001 par value, 100,000 shares authorized; 44,490 shares issued and 43,340 outstanding at September 30, 2017 and 44,203 shares issued and 42,140 outstanding at December 31, 2016		44		44
Additional paid-in capital		228,761		228,692
Treasury stock (1,150 and 2,063 common shares, respectively, at cost)		(4,022)		(8,216)
Accumulated other comprehensive loss		(5,850)		(7,800)
Accumulated deficit		(155,164)		(155,684)
Total stockholders’ equity		63,769		57,036
Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	224,797	$	235,122


	Basis of Fair Value Measurements
	September 30, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	1,548	$	—	$	—	$	1,548
Total	$	1,548	$	—	$	—	$	1,548

Liabilities:
Contingent consideration (1)	$	—	$	—	$	3,890	$	3,890
Total	$	—	$	—	$	3,890	$	3,890


	Basis of Fair Value Measurements
	December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	22	$	—	$	—	$	22
Total	$	22	$	—	$	—	$	22

Liabilities:
Contingent consideration (1)	$	—	$	—	$	6,073	$	6,073
Total	$	—	$	—	$	6,073	$	6,073


				Total Numbers of	Approximate Dollar
				Securities	Value of Securities
	Total Number of	Average		Purchased	That May Yet Be
	Securities	Price per		as Part of Publicly	Purchased Under
Period	Purchased	Securities		Announced Plan	The Plan
	(In thousands)			(In thousands)	(In thousands)

July 1 – July 31	30	$	4.11	30	$	15,233
August 1 – August 31	—	$	—	—	$	15,233
September 1 – September 30	—	$	—	—	$	15,233