What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-05 · 63 added, 120 removed, 260 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

25 unchanged sentences

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

49,362 shares issued and 48,952 outstanding at September 30, 2021 and 48,297 shares issued and 48,189 outstanding at December 31, 2020

49,362 shares issued and 48,230 outstanding at March 31, 2022 and 49,362 shares issued and 48,856 outstanding at December 31, 2021

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating expenses

11 unchanged sentences

Comprehensive income:

Foreign currency translation, net of tax benefit (expense) of $ 303 , ($ 398 ), $ 579 , and ($ 207 ) respectively

Foreign currency translation, net of tax benefit of $ 169 and $ 343 , respectively

Comprehensive income

5 unchanged sentences

Stockholders’

Balance June 30, 2021

Balance December 31, 2021

Other comprehensive loss

1 unchanged sentence

Proceeds from issuance of ESPP shares

Issuance of treasury shares

Issuance of common stock for RSUs vested

Issuance of treasury shares for RSUs vested

Accrued dividends on unvested shares

Dividends payable

Cash dividends paid to shareholders

Stock based compensation

Balance September 30, 2021

Balance March 31, 2022

Comprehensive

4 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 September 30, 2021

Comprehensive

Stockholders’

Balance June 30, 2020

Other comprehensive income

Treasury shares repurchased

Proceeds from issuance of ESPP shares

Issuance of treasury shares

Stock based compensation

Balance September 30, 2020

Comprehensive

Stockholders’

Balance December 31, 2019

Other comprehensive income

Treasury shares repurchased

Proceeds from issuance of ESPP shares

Issuance of treasury shares

Stock based compensation

Balance September 30, 2020

Balance March 31, 2021

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

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

2 unchanged sentences

Amortization of intangible assets

Deferred tax (benefit) expense from stock issuances

Write-off of deferred financing costs

Deferred tax benefit from stock issuances

Amortization of deferred financing costs

1 unchanged sentence

Change in fair value of contingent consideration

(Benefits) provisions for accounts receivable

Deferred tax provision (benefit)

Provisions (benefits) for accounts receivable

Deferred tax provision

Changes in operating assets and liabilities:

7 unchanged sentences

Purchase of furniture, fixtures and equipment

Neuralify acquisition (Note 4)

Net cash used in investing activities

2 unchanged sentences

Proceeds from issuance of employee stock purchase plan shares

Debt financing costs

Payments related to tax withholding for stock-based compensation

3 unchanged sentences

Effect of exchange rate changes on cash

Net increase in cash, cash equivalents, and restricted cash

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

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

17 unchanged sentences

market intelligence and technology research and analysis.

Founded in 2006, and based in Stamford, Conn., ISG employs approximately 1,300 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.

Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 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.

NOTE 2—BASIS OF PRESENTATION

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

The accompanying unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, 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, 2022 and the results of operations for the three months ended March 31, 2022 and 2021 and the cash flows for the three months ended March 31, 2022 and 2021.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the Company’s audited consolidated financial statements.

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

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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”).

8 unchanged sentences

allowance for doubtful accounts, useful lives of furniture, fixtures and equipment and definite lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation, and the valuation of stock-based compensation.

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes.

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes.

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 September 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.

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, 2022 and December 31, 2021 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 primarily consist of measurements to contingent consideration 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).

11 unchanged sentences

Basis of Fair Value Measurements

September 30, 2021

March 31, 2022

Cash equivalents

4 unchanged sentences

Contingent consideration (1)

(1) Contingent consideration is included in “Accrued expenses and other current liabilities” as of September 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.

(1) Contingent consideration is included in “Accrued expenses and other current liabilities” as of March 31, 2022 and December 31, 2021.

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 nine months ended September 30, 2021:

Nine Months Ended

September 30,

The following table represents the change in the contingent consideration liability during the three months ended March 31, 2022:

Three Months Ended

Beginning Balance

Accretion of contingent consideration

Neuralify earnout adjustment (1)

Ending Balance

The Company’s financial instruments include outstanding borrowings of $ 75.6 million at September 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 $ 74.7 million and $ 77.7 million at September 30, 2021 and December 31, 2020, respectively.

The fair values of debt have been estimated

(1) Neuralify earnout adjustment relates to a change in the expected achievement of a certain milestone specific to the acquisition.

The Company’s financial instruments include outstanding borrowings of $ 73.4 million at March 31, 2022 and $ 74.5 million at December 31, 2021, which are carried at amortized cost.

The fair value of debt is classified within Level 3 of

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

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 1.9 % and 2.5 % at September 30, 2021 and December 31, 2020, respectively.

the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 72.3 million and $ 73.6 million at March 31, 2022 and December 31, 2021, 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 2.5 % and 2.0 % at March 31, 2022 and December 31, 2021, 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.

4 unchanged sentences

The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.

NOTE 4 — ACQUISITION

NOTE 4 — ACQUISITIONS

Neuralify Acquisition

22 unchanged sentences

Had the acquisition occurred as of January 1, 2020, the impact on the Company’s results of operations would not have been material.

As of March 31, 2022, the Company has recorded a liability of $ 1.0 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, which is classified as current and included in “Accrued expenses and other current liabilities” on the Consolidated Balance Sheet.

Agreemint Acquisition

On March 28, 2022, ISG executed an asset purchase agreement for the purchase of substantially all of the assets of Agreemint, which is an automated, platform-based contracting solution that will enhance the value of ISG GovernX and our other platform solutions now in development.

We determined the transaction to be an asset acquisition as substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset:

the software and related intellectual property rights.

The cash paid for the acquisition as of the balance sheet date is reflected in Cash flows from investing activities of the Statement of Cash Flows.

The related software acquired, which is capitalized within “Furniture, fixtures and equipment, net”, will be depreciated over four years when put into service at the end of the 60 -day transition period underway to integrate the offering with our ISG GovernX cloud solution.

NOTE 5—REVENUE

8 unchanged sentences

Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require judgment.

Estimates were required to determine the SSP for each distinct performance obligation identified within our managed service (including GovernX) implementation contracts, software and implementation contracts, and research and subscription contracts.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Contract Balances

8 unchanged sentences

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

receipt of the consideration is conditional only on the passage of time and there are no performance risk factors present.

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.

September 30,

Contract assets

Contract liabilities

Revenue recognized for the three and nine months ended September 30, 2021 that was included in the contract liability balance at January 1, 2021 was $ 0.2 million and $ 3.4 million, respectively, and represented primarily revenue from our fixed fee and subscription contracts.

Revenue recognized for the three months ended March 31, 2022 that was included in the contract liability balance at January 1, 2022 was $ 3.6 million, and represented primarily revenue from our fixed fee and subscription contracts.

Remaining Performance Obligations

As of September 30, 2021, the Company had $ 98.0 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

As of March 31, 2022, the Company had $ 119.9 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

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 and nine months ended September 30, 2021, 0.0 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.

For the three months ended March 31, 2022 and 2021, 0.0 million and 0.1 million restricted stock units, respectively, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Weighted average common shares

5 unchanged sentences

NOTE 7—INCOME TAXES

The Company’s effective tax rate for the three and nine months ended September 30, 2021 was 34.9 % and 27.7 % based on pretax income of $ 6.8 million and $ 16.5 million, respectively.

The Company’s effective tax rate for the quarter ended September 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 nine months ended September 30,

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

2020 was 9.9 % and 57.6 %.

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.

The Company’s effective tax rate for the three months ended March 31, 2022, and 2021 was 31.9 % and 22.7 % based on pretax income of $ 7.2 million and $ 4.4 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.

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 September 30, 2021 and December 31, 2020.

Neuralify Contingent Consideration

As of September 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.

All material liabilities of which management is aware are properly reflected in the financial statements at March 31, 2022 and December 31, 2021.

NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

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

The Company does not measure or monitor gross profit or operating income by geography or by service line for the purposes of making operating decisions or allocating resources.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

NOTE 10—FINANCING ARRANGEMENTS AND LONG-TERM DEBT

4 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

● 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.

5 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 $ 75.6 million and $ 78.8 million at September 30, 2021 and December 31, 2020, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of $ 73.4 million and $ 74.5 million at March 31, 2022 and December 31, 2021, 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 $ 74.7 million and $ 77.7 million at September 30, 2021 and December 31, 2020, respectively.

The fair value of the Company's outstanding borrowings is approximately $ 72.3 million and $ 73.6 million at March 31, 2022 and December 31, 2021, 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 1.9 % and 2.5 % at September 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 and interest rates.

As of September 30, 2021 and December 31, 2020, there were no borrowings under the revolver.

NOTE 11 - RISKS AND UNCERTAINTIES

On March 11, 2020, the World Health Organization declared the coronavirus (COVID-19) a pandemic, following the rapid spread of the disease from where it was first diagnosed, in China, to nations worldwide.

The outbreak sparked responses across countries, states and cities worldwide to enforce various measures of social distancing and shelter-in-place orders and temporary closure of non-essential businesses to reduce further transmission of the virus.

As a result of these measures, the US and global markets have seen significant disruption, the extent and duration of which remains highly uncertain.

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

The incremental borrowing rate used to discount future cash flows is 2.5 % and 2.0 % at March 31, 2022 and December 31, 2021, respectively.

The Company also considered recent transactions of peer group companies for

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

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 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 .

similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates.

As of March 31, 2022 and December 31, 2021, there were no borrowings under the revolver.

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.

Accordingly, the Company believes that based upon current facts and circumstances, its existing cash coupled with the cash flows generated from operations will be sufficient to meet its cash needs for 12 months from the date of issuance of these financial statements.

NOTE 12 — RESTRUCTURING CHARGES

2020 Restructuring Plan

In the third and fourth quarters of 2020, the Company took restructuring actions to lower our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business (the “Restructuring Plan”).

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 September 30, 2021 is as follows:

Restructuring Plan

Balance at January 1, 2020

Amounts accrued

Amounts paid/incurred

Balance at September 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 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