What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 51 added, 42 removed, 305 unchanged (23% of the section changed)

30 unchanged sentences

Common stock, $ 0.001 par value, 100,000 shares authorized;

49,362 shares issued and 48,607 outstanding at March 31, 2021 and 48,297 shares issued and 48,189 outstanding at December 31, 2020

49,362 shares issued and 48,377 outstanding at June 30, 2021 and 48,297 shares issued and 48,189 outstanding at December 31, 2020

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Operating expenses

2 unchanged sentences

Depreciation and amortization

Operating income (loss)

Operating income

Interest income

Interest expense

Foreign currency transaction (loss) gain

Income (loss) before taxes

Income tax provision (benefit)

Foreign currency transaction gain (loss)

Income before taxes

Income tax provision

Net income (loss)

3 unchanged sentences

Net income (loss)

Foreign currency translation, net of tax expense of $ 343 and $ 479 , respectively

Foreign currency translation, net of tax (expense) benefit of $( 66 ), $( 287 ), $ 277 , and $ 192 respectively

Comprehensive income (loss)

9 unchanged sentences

Proceeds from issuance of ESPP shares

Issuance of treasury shares

Issuance of common stock for RSUs vested

Accrued dividends on unvested shares

Cash dividends paid to shareholders

Stock based compensation

Balance March 31, 2021

Balance June 30, 2021

Comprehensive

6 unchanged sentences

Stock based compensation

Balance March 31, 2020

Balance June 30, 2020

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

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation expense

22 unchanged sentences

Payments related to tax withholding for stock-based compensation

Cash dividends paid to shareholders

Treasury shares repurchased

1 unchanged sentence

Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents , and restricted cash, beginning of period

19 unchanged sentences

NOTE 2—BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, 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 March 31, 2021 and the results of operations for the three months ended March 31, 2021 and 2020 and the cash flows for the three months ended March 31, 2021 and 2020.

The accompanying unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, 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 June 30, 2021 and the results of operations for the three and six months ended June 30, 2021 and 2020 and the cash flows for the six months ended June 30, 2021 and 2020.

The condensed consolidated balance sheet as of December 31, 2020 has been derived from the Company’s audited consolidated financial statements.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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”).

13 unchanged sentences

(tabular amounts in thousands, except per share data)

The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at March 31, 2021 and December 31, 2020 due to the short-term nature of these accounts.

The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at June 30, 2021 and December 31, 2020 due to the short-term nature of these 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 contingent consideration in a business combination.

12 unchanged sentences

Basis of Fair Value Measurements

March 31, 2021

June 30, 2021

Cash equivalents

4 unchanged sentences

Contingent consideration (2)

(1) Contingent consideration is included in “Other current liabilities” for the first quarter 2021.

(2) The current and noncurrent Contingent consideration is included in “Accrued expenses” and “Other current liabilities,” respectively, as of December 31, 2020.

(1) Contingent consideration is included in “Accrued expenses and other current liabilities” as of June 30, 2021.

(2) The current and noncurrent Contingent consideration is included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of December 31, 2020.

The fair value measurement of the 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 .

2 unchanged sentences

These cash outflow projections have then been discounted using a rate of 2.50 %.

The following table represents the change in the contingent consideration liability during the three months ended March 31, 2021:

Three Months Ended

The following table represents the change in the contingent consideration liability during the six months ended June 30, 2021:

Six Months Ended

Beginning Balance

7 unchanged sentences

(tabular amounts in thousands, except per share data)

The Company’s financial instruments include outstanding borrowings of $ 77.7 million at March 31, 2021 and $ 78.8 million at December 31, 2020, which are carried at amortized cost.

The Company’s financial instruments include outstanding borrowings of $ 76.6 million at June 30, 2021 and $ 78.8 million at December 31, 2020, which are carried at amortized cost.

The fair value of debt is classified within Level 3 of the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 76.7 million and $ 77.7 million at March 31, 2021 and December 31, 2020, respectively.

The fair value of the Company's outstanding borrowings is approximately $ 75.8 million and $ 77.7 million at June 30, 2021 and December 31, 2020, 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 is 2.44 % and 2.49 % at March 31, 2021 and December 31, 2020, respectively.

The incremental borrowing rate used to discount future cash flows is 1.9 % and 2.5 % at June 30, 2021 and December 31, 2020, 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.

16 unchanged sentences

This business combination was accounted for under the acquisition method of accounting, and as such, the aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed based on estimated fair values as of the closing date.

Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

Based on the valuation and other factors as described above, the purchase price assigned to intangible assets were as follows:

INFORMATION SERVICES GROUP, INC.

38 unchanged sentences

Contract liabilities

Revenue recognized for the three months ended March 31, 2021 that was included in the contract liability balance at January 1, 2021 was $ 1.9 million and represented primarily revenue from our fixed fee and subscription contracts.

Revenue recognized for the three and six months ended June 30, 2021 that was included in the contract liability balance at January 1, 2021 was $ 1.3 million and $ 3.2 million, respectively, and represented primarily revenue from our fixed fee and subscription contracts.

Remaining Performance Obligations

As of March 31, 2021, the Company had $ 110.6 million of remaining performance obligations, the majority of which are expected to be satisfied within the next year.

As of June 30, 2021, the Company had $ 113.8 million of remaining performance obligations, the majority of which are expected to be satisfied within the next year.

NOTE 6—NET INCOME PER COMMON SHARE

1 unchanged sentence

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 ended March 31, 2021 and 2020, 0.1 million and 6.0 million restricted stock units, respectively, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

For the three and six months ended June 30, 2021, 0.2 million and 0.3 million restricted stock units, respectively, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

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

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

7 unchanged sentences

NOTE 7—INCOME TAXES

The Company’s effective tax rate for the three months ended March 31, 2021 and 2020 was 22.7 % and 27.2 % based on pretax income of $ 4.4 million and pretax loss of $ 1.9 million, respectively.

The Company’s effective tax rate for the quarter ended March 31, 2021 was impacted by the earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units.

The Company’s effective tax rate for the three and six months ended June 30, 2021 was 22.5 % and 22.6 % based on pretax income of $ 5.3 million and $ 9.7 million, respectively.

The Company’s effective tax rate for the quarter ended June 30, 2021 was impacted by the earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units.

The Company’s effective tax rate for the three and six months ended June 30, 2020 was 77.0 % and 193.6 %.

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

The difference was primarily due to the impact of earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units.

NOTE 8—COMMITMENTS AND CONTINGENCIES

The Company is subject to contingencies which arise through the ordinary course of business.

All material liabilities of which management is aware are properly reflected in the financial statements at March 31, 2021 and December 31, 2020.

All material liabilities of which management is aware are properly reflected in the financial statements at June 30, 2021 and December 31, 2020.

Neuralify Contingent Consideration

As of March 31, 2021, the Company has recorded a liability of $ 5.4 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, all of which is classified as current and included in Other current liabilities on the consolidated balance sheet.

As of June 30, 2021, the Company has recorded a liability of $ 5.4 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, all of which is classified as current and included in Other current liabilities on the consolidated balance sheet.

NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION

3 unchanged sentences

Three Months Ended

Six Months Ended

The segregation of revenues by geographic region is based upon the location of the legal entity performing the services.

6 unchanged sentences

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

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

plus the applicable margin (as defined below) or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent, plus the applicable margin.

● At the Company’s option, the credit facility bears interest at a rate per annum equal to either (i) the “Base Rate” (which is the highest of (a) the rate publicly announced from time to time by the administrative agent as its “prime rate”, (b) the Federal Funds Rate plus 0.5 % per annum and (c) the Eurodollar Rate, plus 1.0 %), plus the applicable margin (as defined below) or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent, plus the applicable margin.

The applicable margin is adjusted quarterly based upon the Company’s quarterly leverage ratio.

4 unchanged sentences

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

The Company’s financial statements include outstanding borrowings of $ 77.7 million and $ 78.8 million at March 31, 2021 and December 31, 2020, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of $ 76.6 million and $ 78.8 million at June 30, 2021 and December 31, 2020, respectively, which are carried at amortized cost.

The fair value of debt is classified within Level 3 of the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 76.7 million and $ 77.7 million at March 31, 2021 and December 31, 2020, respectively.

The fair value of the Company's outstanding borrowings is approximately $ 75.8 million and $ 77.7 million at June 30, 2021 and December 31, 2020, 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.

6 unchanged sentences

The impact of COVID-19 pandemic continues to evolve and, therefore, the Company cannot predict with certainty the extent to which the pandemic will negatively impact our results of operations, cash flows and financial position, liquidity and ability to remain in compliance with our financial covenants.

Given the uncertainty of the marketplace, during fiscal year 2020, the Company implemented business continuity plans to ensure that the Company is able to remain fully operational with a remote workforce, conducted financial modeling scenarios in order to ensure prudent cost containment, and has proactively implemented a series of cash conservation measures.

These measures reduced personnel

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

costs and other operating expenses, including reductions in staffing and contractor levels, vendor spending, travel, and other measures.

containment, and has proactively implemented a series of cash conservation measures.

These measures reduced personnel costs and other operating expenses, including reductions in staffing and contractor levels, vendor spending, travel, and other measures.

The Company has financial covenants underlying its debt which require a Debt to adjusted EBITDA ratio of 3.25 .

1 unchanged sentence

Accordingly, in light of this uncertainty, the Company has developed plans to further reduce operating expenses to the extent more prolonged revenue shortfalls are experienced which would prevent the Company from complying with its financial covenants.

The Company is currently in compliance with its financial covenants.

Management's plans would allow the Company to generate sufficient cash flows to reduce the Company's outstanding net debt and enable the Company to comply with the terms of its debt arrangements.

4 unchanged sentences

Most of these actions are based on our recent experience and learning in the COVID-19 pandemic and a resulting review of our operations, which continues to address certain operating expenses such as occupancy expense and salaries and related expenses.

A summary of the activity affecting the Company's accrued contractual termination benefit liability for the period ended March 31, 2021 is as follows:

A summary of the activity affecting the Company's accrued contractual termination benefit liability for the period ended June 30, 2021 is as follows:

Restructuring Plan

2 unchanged sentences

Amounts paid/incurred

Balance at March 31, 2021

Balance at June 30, 2021

The $ 2.3 million of net restructuring charges was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses.

We expect that the remaining actions of the Restructuring Plan Plan will be completed over the next six months .

We expect that the remaining actions of the Restructuring Plan will be completed over the next three months .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements