UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 20172023
OR
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, CT06902281 Tresser Boulevard(Address of principal executive offices and zip code)
Stamford, CT 06901
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 Registrantregistrant (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 | |
Common Stock, $0.001 par value | |
|
| | |
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. TheOur 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’sour 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 fileswe 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.
1
PART I — FINANCIAL INFORMATION
ITEM 1.FINANCIAL1.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.
2
INFORMATION SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT 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.
3
INFORMATION SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSSTOCKHOLDERS’ 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 |
|
4
INFORMATION SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF 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, 2022 | | 49,362 |
| $ | 49 |
| $ | 232,994 | | $ | (10,523) | | $ | (9,742) | | $ | (118,586) | | $ | 94,192 |
Net Income | | — | | | — | | | — | | | — | | | — | | | 5,556 | | | 5,556 |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (1,997) | | | — | | | (1,997) |
Treasury shares repurchased | | — | | | — | | | — | | | (4,281) | | | | | | — | | | (4,281) |
Proceeds from issuance of ESPP shares | | — | | | — | | | (36) | | | 283 | | | — | | | — | | | 247 |
Issuance of treasury shares for RSUs vested | | — | | | — | | | (5,390) | | | 5,390 | | | — | | | — | | | — |
Accrued dividends on unvested shares | | — | | | — | | | (13) | | | — | | | — | | | — | | | (13) |
Cash dividends paid to shareholders ($0.04 per share) | | — | | | — | | | (2,049) | | | — | | | — | | | — | | | (2,049) |
Stock based compensation | | — | | | — | | | 1,987 | | | — | | | — | | | — | | | 1,987 |
Balance September 30, 2022 |
| 49,362 | | $ | 49 | | $ | 227,493 | | $ | (9,131) | | $ | (11,739) | | $ | (113,030) | | $ | 93,642 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | | |
| | | | | | | Additional | | | | | Other | | | | | Total | |||
| | Common Stock | | Paid-in- | | Treasury | | Comprehensive | | Accumulated | | Stockholders’ | ||||||||
|
| Shares |
| Amount |
| Capital |
| Stock |
| Loss |
| Deficit |
| Equity | ||||||
Balance December 31, 2021 | | 49,362 | | $ | 49 | | $ | 237,628 | | $ | (3,871) | | $ | (6,940) | | $ | (128,473) | | $ | 98,393 |
Net Income |
| — |
| | — |
| | — |
| | — |
| | — |
| | 15,443 |
| | 15,443 |
Other comprehensive loss |
| — |
| | — |
| | — |
| | — |
| | (4,799) |
| | — |
| | (4,799) |
Treasury shares repurchased |
| — |
| | — |
| | — |
| | (15,804) |
| | — |
| | — |
| | (15,804) |
Proceeds from issuance of ESPP shares |
| — |
| | — |
| | (136) |
| | 831 |
| | — |
| | — |
| | 695 |
Issuance of treasury shares for RSUs vested | | — | | | — | | | (9,713) | | | 9,713 |
| | — |
| | — |
| | — |
Accrued dividends on unvested shares | | — | | | — | | | (270) | | | — | | | — | | | — | | | (270) |
Cash dividends paid to shareholders ($0.11 per share) | | — | | | — | | | (5,448) | | | — | | | — | | | — | | | (5,448) |
Stock based compensation |
| — |
| | — |
| | 5,432 | | | — |
| | — |
| | — |
| | 5,432 |
Balance September 30, 2022 |
| 49,362 |
| $ | 49 |
| $ | 227,493 | | $ | (9,131) | | $ | (11,739) | | $ | (113,030) | | $ | 93,642 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
45
INFORMATION SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
| | | | | | |
| | 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 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
INFORMATION SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands, except per share data)
(unaudited)
NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Information Services Group, Inc. (Nasdaq: III) (the “Company”,“Company,” “ISG,” “we,” “us” or “ISG”“our”) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the top 100 enterprises in our markets, ISG is committed to helping corporations, public sector organizations and service and technology providers achieve operational excellence and faster growth. 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. Based 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 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 is not incorporated by reference into this Quarterly Report on Form 10-Q, and the inclusion of our website address in this Quarterly Report on Form 10-Q is only for reference.
Our Company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. In 2007, we consummatedWe continue to believe that our initial public offering and completedvision will be realized through the acquisition, integration and successful operation of TPI Advisory Services Americas, Inc. (“TPI”). In December 2016, we consummated our transformational acquisition of Alsbridge Holdings, Inc. (“Alsbridge”).market leading brands within the data, analytics and advisory industry.
NOTE 2—BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements as of September 30, 20172023 and for the three and nine months ended September 30, 20172023 and 2016,2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are considered necessary for a fair statement of the financial position of the Company as of September 30, 2017,2023, the results of operations for the three and nine months ended September 30, 20172023 and 20162022 and the cash flows for the nine months ended September 30, 20172023 and 2016.2022. The condensed consolidated balance sheet as of December 31, 20162022 has been derived from the Company’s audited consolidated financial statements. Operating results for the three and nine months ended September 30, 20172023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2023.
Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2016,2022, which are included in the Company’s 20162022 Annual Report on Form 10-K filed with the SEC.
Reclassification
Certain prior years’ amounts have been reclassified to conform to the current year’s presentation, including reclassification to the Condensed Consolidated Statements of Cash Flows due to the adoption of the share-based payment accounting standard in the first quarter of 2017 as further described below under Note 3—Summary of Significant Accounting Policies: Recently Issued Accounting Pronouncements. This reclassification had no impact on our results of operations, financial position, or changes in shareholders’ equity.
NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of AmericaGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the proportional performance method of accountingrevenue recognition guidance for contracts in which control is transferred to the customer over time affect the amounts of revenues, expenses, unbilled receivablescontract assets and deferred revenue.contract liabilities. Numerous internal and external factors can affect estimates. Estimates are also used for but are not limited to: allowance for doubtful accounts,credit
7
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 analyzingevaluating goodwill and intangible asset impairments,for impairment, income taxes and deferred tax asset valuation and the valuation of stock basedstock-based compensation.
5
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, 20172023 and December 31, 20162022 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. |
8
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) |
| The |
6
INFORMATION SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)
(tabular amounts in thousands, except per share data)
(unaudited)
The Company’sfollowing table represents the change in the contingent consideration liability was $3.9 million and $6.1 million atduring 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, 20172023, 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'sCompany’s outstanding borrowings iswas approximately $118.0$79.9 million and $124.9$76.5 million atas of September 30, 20172023 and December 31, 2016,2022, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company'sCompany’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 representsconditions and interest rates. In the change inthird quarter of 2023, the contingent consideration liabilityCompany 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 usequarter. 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.
79
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, revenueloss methodology, which will be recognized over time due to the existenceresult 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 theadopted this standard using the cumulative catch-up transitionmodified 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 adoptionaccounting, 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 requirementsfair 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 taxesclosing 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 requiresprimary factors that all deferreddrove 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 annuallegacy Change 4 Growth workforce and interim periodsassociated 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:
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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:
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| Purchase Price |
| Estimated | |
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| 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 adoptionmajority of this guidanceour 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 bycontracts and, therefore, is not distinct. For contracts with multiple performance obligations, the Company did not have a material impact on its resultsallocates 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 classifiedstandalone 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 impactestablishes SSP based on management’s estimated selling price or observable prices of the guidance on its consolidated financial statementsproducts 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 cashThe timing of revenue recognition, billings and cash equivalents when reconciling the beginning-of-periodcollections result in billed accounts receivables, unbilled receivables (contract assets) and end-of-period total amounts showncustomer advances and deposits (contract liabilities). Our clients are billed based on the statementtype 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 offixed amount for our services. This may be one single amount covering the cash balanceswhole 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 statementcurrent assets and current liabilities sections of the consolidated balance sheet, would needat 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:
11
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 ofsatisfied 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 sharesstock 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.
9
INFORMATION SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)
(tabular amounts in thousands, except per share data)
(unaudited)
The following tables settable sets forth the computation of basic and diluted earnings per share:
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| Three Months Ended September 30, |
| Nine Months Ended September 30, |
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
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| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||||||||||||||||
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| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||||||||||||
Basic: |
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Net income attributable to ISG |
| $ | 1,428 |
| $ | 732 |
| $ | 520 |
| $ | 1,645 |
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Net income | | $ | 3,201 | | $ | 5,556 | | $ | 9,025 | | $ | 15,443 | ||||||||||||||
Weighted average common shares |
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| 43,305 |
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| 35,707 |
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| 42,893 |
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| 36,219 |
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| |
| 48,711 | |
| 47,888 | |
| 48,542 | |
| 48,191 |
Earnings per share attributable to ISG |
| $ | 0.03 |
| $ | 0.02 |
| $ | 0.01 |
| $ | 0.05 |
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Earnings per share | | $ | 0.07 | | $ | 0.12 | | $ | 0.19 | | $ | 0.32 | ||||||||||||||
Diluted: |
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Net income attributable to ISG |
| $ | 1,428 |
| $ | 732 |
| $ | 520 |
| $ | 1,645 |
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Interest expense of convertible debt, net of tax |
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| 2 |
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| 1 |
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| 6 |
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| 21 |
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Net income attributable to ISG, as adjusted |
| $ | 1,430 |
| $ | 733 |
| $ | 526 |
| $ | 1,666 |
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Net income | | $ | 3,201 | | $ | 5,556 | | $ | 9,025 | | $ | 15,443 | ||||||||||||||
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Basic weighted average common shares |
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| 43,305 |
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| 35,707 |
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| 42,893 |
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| 36,219 |
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| 48,711 | |
| 47,888 | |
| 48,542 | |
| 48,191 |
Potential common shares |
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| 1,353 |
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| 1,166 |
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| 451 |
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| 758 |
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| |
| 1,546 | |
| 1,956 | |
| 1,745 | |
| 2,446 |
Diluted weighted average common shares |
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| 44,658 |
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| 36,873 |
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| 43,344 |
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| 36,977 |
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| |
| 50,257 | |
| 49,844 | |
| 50,287 | |
| 50,637 |
Diluted earnings per share attributable to ISG |
| $ | 0.03 |
| $ | 0.02 |
| $ | 0.01 |
| $ | 0.05 |
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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, 20172023 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 thanimpacted by non-deductible expenses and earnings and losses in certain foreign jurisdictions and the statutoryimpact of the vesting of restricted stock units. The Company’s effective tax rate for the three and nine
12
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 releasevesting 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 wereis aware are properly reflected in the financial statements atas of September 30, 20172023 and December 31, 2016.2022.
SaugatuckChange 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, ofChange 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 inIn April 2017 related to 2016 performance.
10
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 recordedmade a liability of $0.8 million representing the estimated fair value of contingent consideration related to the acquisitionpayment 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:
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| | September 30, | | September 30, | |||||||||||||||||||||
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| 2022 |
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| 2022 | |||||||||||||||||
Revenues |
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Americas |
| $ | 41,524 |
| $ | 29,239 |
| $ | 122,581 |
| $ | 86,832 |
| | $ | 42,469 | | $ | 42,174 | | $ | 133,149 | | $ | 123,059 |
Europe |
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| 19,732 |
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| 16,611 |
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| 61,443 |
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| 56,885 |
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| 22,090 | |
| 19,321 | |
| 69,496 | |
| 66,039 |
Asia Pacific |
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| 7,093 |
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| 6,079 |
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| 18,918 |
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| 18,495 |
| |
| 7,214 | |
| 7,341 | |
| 22,223 | |
| 23,002 |
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| $ | 68,349 |
| $ | 51,929 |
| $ | 202,942 |
| $ | 162,212 |
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| | $ | 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.
11
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 20162023 Credit Agreement are as follows: Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:
● |
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|
● |
| 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. |
13
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 |
● |
| 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) |
● |
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| 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 |
● |
| The senior secured credit facility contains customary events of default, including cross-default to other material agreements, judgment default and change of control. |
12
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 principalfair value hierarchy. The fair value of the Company’s outstanding under the term loan facility and revolving credit facilityborrowings was $105.9approximately $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 partOctober 31, 2023, a subsidiary of the consideration forCompany executed an Asset Purchase Agreement with Ventana Research, Inc. and consummated the acquisition of Compass, we issued an aggregatesubstantially all assets, and assumed certain liabilities, of $6.3Ventana Research, Inc. The purchase price was comprised of $1.0 million in convertible notesof 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 onreceive additional consideration paid via earn-out payments during the outstanding principal amount, computed daily, atnext 26 months, if certain financial targets are met.
On November 1, 2023, the rateBoard 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 holderpayable 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 20172023 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 20162022 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 intelligenceresearch and advisory services company servingfirm. A trusted business partner to over 900 clients, including more than 700 clients around75 of the worldtop 100 enterprises in our markets, ISG is committed to help themhelping corporations, public sector organizations and service and technology providers achieve operational excellence and faster growth. ISGThe 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 privateFounded 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 employeesindustry’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 operatesis 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 strategicclient accounts or other significant client events. Other areas that couldmay 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 expensesthe level of client involvement. Revenues for professional services. A portion of our revenuesservices rendered are generated under hourly or daily rates billedrecognized on a time and expense basis. Clients are typically invoicedmaterials basis or on a monthlyfixed-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. Thereperformed. Revenues for time and materials contracts are also client engagementsbilled 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 coveringaccordance 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 attainmentspecific 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. Allcontracts. These offerings are characterized by subscriptions (i.e., renewal centricrenewal-centric as opposed to project centricproject-centric revenue streams) or, in some instances, multi-year contracts. Our digital services now span a volume of offerings and have
15
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.
14
Our results are impacted principally by our full timefull-time consultants’ utilization rate, the number of business days in each quarter and the number of our revenue generatingrevenue-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 resultsresult 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 daysworkdays is also affected by the number of vacation days taken by our consultants and holidays in each quarter. We typically have fewer business work daysworkdays available in the fourth quarter of the year, which can impact revenues during that period. Time and expenseTime-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, 20172023 AND SEPTEMBER 30, 20162022
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:
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| Change |
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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 inrevenue for the Americas and Europe regions was primarily attributable to higher levels of sourcing activityan increase in our Consulting line ofAdvisory and Automation service due to the Alsbridge acquisition and increased sourcing revenuelines, partially offset by a decrease in Germany.our Network & Software Advisory Services (NaSa) service line. The increase in revenuesrevenue in the Asia Pacific regionEurope was primarily attributable to higher levels of sourcing activityan increase in our Consulting lineAutomation 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.
15
Operating Expenses
The following table presents a breakdown of our operating expenses by category:
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Operating Expenses |
| 2017 |
| 2016 |
| Change |
| Change |
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| 2023 |
| 2022 |
| Change |
| Change |
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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 increasesof 2023. The increase in selling, general and administrative (“SG&A”)operating expenses direct expenses and depreciation and amortization. The increases werewas primarily due primarily to higher compensation and benefits, bad debts and travel expenses due to the acquisitionlicense fees of Alsbridge. We also recorded $0.4$2.5 million, in contract labor expense of $1.2 million,
16
severance and integration related expenses and $0.5other expense of $0.7 million, related to the reversaland 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 increasescosts 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 sharingprofit-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 sharingprofit-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 expenseexpenses 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 20172023 and 20162022 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,
16
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, |
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| | | | | | | | | | | 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) | % | |
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| Three Months Ended September 30, |
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| 2017 |
| 2016 |
| Change |
| Change |
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| (in thousands) |
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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) | % |
|
17
The total increase in other expenses of $1.2$0.8 million was primarily the result of higher interest expense dueexpenses attributable to an increase inhigher 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 monthsquarter ended September 30, 20172023 was 14.1%33.2% compared to 61.9%18.0% for the three monthsquarter ended September 30, 2016.2022. The difference for the quarter ended September 30, 2023 was primarily due to the partial releaseimpact of liability accrued for previously unrecognized tax benefitsearnings and losses in certain foreign jurisdictions and the impact of current quarter earnings in jurisdictions where the Company is currently precluded from booking avesting of restricted stock units. The Company’s effective tax provisionrate for the three monthsquarter 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, 20172023 AND SEPTEMBER 30, 20162022
Revenues
Geographical revenue information for the segment is as follows:
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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 revenuesrevenue in the Americas region was primarily attributable to higher levels of sourcing activityan increase in Consulting, primarily associated with the acquisitions of TracePointour Advisory and Alsbridge.Automation service lines. The increase in therevenue in Europe regionwas 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 activitydecrease in our ConsultingAdvisory service line, of business, primarily associated with the acquisition of Alsbridge and increased sourcing revenue in Germany. Thebeing partially offset by an increase in our GovernX service line. The translation of foreign currency revenues into U.S. dollars negatively impacted performance in theEurope and Asia Pacific region was primarily attributablecompared to higher levels of Consulting and Managed Services.the prior year by $0.8 million.
17
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 | % |
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| Nine Months Ended September 30, |
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Operating Expenses |
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| Percent |
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| 2017 |
| 2016 |
| Change |
| Change |
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| (in thousands) |
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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 | % |
|
18
Total operating expenses increased $41.5$16.9 million, or approximately 9%, for 2017 with increasesthe nine months ended September 30, 2023. The increase in SG&Aoperating expenses direct expenses and depreciation and amortization. The increases werewas 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, stockand profit-sharing plan contributions. A portion of compensation expenseexpenses 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, comparedcosts 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 quarteremployees 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 subleasecompensation 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 werenew client contracts. Costs also dueinclude travel expenses relating to the acquisitionspursuit of TracePoint, Expertonsales 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 millionmaintain 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 establishedgeneral 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 reversedimplementing 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 2017the nine months ended September 30, 2023 and 20162022 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, Expertonis not amortized but is subject to annual impairment testing and Alsbridge.interim impairment tests, if triggering events are identified.
19
Other Income (Expense), Net
The following table presents a breakdown of other income (expense), net:
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| | Nine Months Ended September 30, |
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| | | | | | | | | | | Percent |
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Other income (expense), net |
| 2023 |
| 2022 |
| Change |
| Change |
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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 dueexpenses attributable to an increase inhigher interest rates, andour 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, 20172023 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, 20172023 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 whereuncertain tax position reserves or valuation allowances during the Company is currently precluded from booking a tax provision for the
18
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 earningsnet 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 integrationother 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 whichthat 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) |
| Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition |
(2) |
| Marginal tax rate of |
21
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:
● |
|
● | net cash provided by operating activities of |
● |
|
|
● |
| payments related to debt financing costs of |
● |
|
|
20
● |
|
|
● |
|
|
| payments |
● |
|
|
● | 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 20162023 Credit Agreement are as follows:follows. Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:
● |
|
|
● |
| 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. |
● |
| The Company’s direct and indirect existing and future |
● |
| 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) |
22
relevant interest period plus a credit spread adjustment of 0.10%) as determined by the |
● |
|
|
|
|
| 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 of property or assets, investments (including loans, advances, guarantees and acquisitions), |
21
pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Company is required to comply with a |
● |
| The senior secured credit facility contains customary events of default, including cross-default to other material agreements, judgment default and change of control. |
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 principalfair value hierarchy. The fair value of the Company's outstanding under the term loan facility and revolving credit facilityborrowings was $105.9approximately $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 partWe 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, 2018pursue and interest is payablecomplete 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 $4stock. The Company expects to pay a total cash dividend of $0.18 per share for 60 consecutive trading days (the “Trigger Event”), the holderfour 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 sharesrecord as of our common stock at the rate of 1 shareDecember 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 ofdecrease to Stockholders’ Equity. All future dividends will be subject to the Trigger Event.Board’s approval.
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.
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.
23
Recently Issued Accounting Pronouncements
See Note 3 to our condensed consolidated financial statements included elsewhere in this report.
22
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-goingongoing 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 expectedbelieve that our internationaltotal exposure is limited and is considered in our forecasted cash uses.
Foreign Currency Risk
A significant portion of our revenues will continueare 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 growthe U.S. dollar, the Company is exposed to both foreign currency translation and transaction risk.
Translation risk arises as European, Asianour 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 asa 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 andcondensed 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
ConcentrationsFinancial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash andshort-term, highly liquid investments classified as cash equivalents and accounts receivable. Allreceivable 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 extendwith 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.
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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 anyno 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.
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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, 20162022 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.
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| Total Numbers of |
| Approximate Dollar |
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| Securities |
| Value of Securities |
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| Total Number of |
| Average |
| Purchased |
| That May Yet Be |
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| Securities |
| Price per |
| as Part of Publicly |
| Purchased Under |
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Period |
| Purchased |
| Securities |
| Announced Plan |
| The Plan |
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| (In thousands) |
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July 1 – July 31 |
| 30 |
| $ | 4.11 |
| 30 |
| $ | 15,233 |
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August 1 – August 31 |
| — |
| $ | — |
| — |
| $ | 15,233 |
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September 1 – September 30 |
| — |
| $ | — |
| — |
| $ | 15,233 |
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| 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) | ||
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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).
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ITEM 6.EXHIBITS
The following exhibits are filed as part of this report:
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 | * | |
32.2 | * | |
101 | * | The following materials from ISG’s Quarterly Report on Form 10-Q for the quarter ended September 30, |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* | Filed herewith |
*Filed herewith.
SIGNATURES
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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.
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INFORMATION SERVICES GROUP, INC. | |
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Date: November | /s/ Michael P. Connors |
| Michael P. Connors, Chairman of the |
| Board and Chief Executive Officer |
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Date: November | /s/ |
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| President and Chief Financial Officer |
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