What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-10 · 62 added, 63 removed, 260 unchanged (32% of the section changed)

30 unchanged sentences

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

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

49,362 shares issued and 47,756 outstanding at June 30, 2022 and 49,362 shares issued and 48,856 outstanding at December 31, 2021

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Operating expenses

11 unchanged sentences

Comprehensive income:

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

Foreign currency translation, net of tax benefit (expense) of $ 717 , $( 66 ), $ 886 and $ 277 respectively

Comprehensive income

11 unchanged sentences

Accrued dividends on unvested shares

Dividends payable

Cash dividends paid to shareholders

Stock based compensation

Balance March 31, 2022

Balance June 30, 2022

Comprehensive

4 unchanged sentences

Proceeds from issuance of ESPP shares

Issuance of treasury shares for RSUs vested

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

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

48 unchanged sentences

NOTE 2—BASIS OF PRESENTATION

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 accompanying unaudited condensed consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 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 June 30, 2022 and the results of operations for the three and six months ended June 30, 2022 and 2021 and the cash flows for the six months ended June 30, 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 months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three and six months ended June 30, 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”).

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, 2022 and December 31, 2021 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, 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.

7 unchanged sentences

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

The following tables summarize the assets measured at fair value on a recurring basis at the dates indicated:

Basis of Fair Value Measurements

March 31, 2022

June 30, 2022

Cash equivalents

Contingent consideration (1)

Basis of Fair Value Measurements

2 unchanged sentences

Contingent consideration (1)

(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 .

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 of 2.50 %.

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

Three Months Ended

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Due to a restructuring of the earn-out provision associated with the 2020 acquisition of Neuralify, the $ 1.0 million contingent consideration became a fixed amount as of June 30, 2022 and the amount accrued was fully paid in July 2022.

The following table represents the change in the contingent consideration liability during the six months ended June 30, 2022:

Six Months Ended

Beginning Balance

2 unchanged sentences

(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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

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 Company’s financial instruments include outstanding borrowings of $ 72.3 million at June 30, 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 the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 70.7 million and $ 73.6 million at June 30, 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 incremental borrowing rate used to discount future cash flows is 3.8 % and 2.0 % at June 30, 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.

2 unchanged sentences

The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses and additional disclosures.

As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022.

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

As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022, which is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 4 — ACQUISITIONS

6 unchanged sentences

The following table summarizes the consideration transferred to acquire Neuralify, LLC and the amounts of identified assets acquired, and liabilities assumed as of the Agreement date:

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Contingent consideration

4 unchanged sentences

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Accounts receivable

6 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.

As of June 30, 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

3 unchanged sentences

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.

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 transition period underway to integrate the offering with our ISG GovernX cloud solution.

NOTE 5—REVENUE

2 unchanged sentences

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.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

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.

3 unchanged sentences

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Contract Balances

12 unchanged sentences

Contract liabilities

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.

Revenue recognized for the three and six months ended June 30, 2022 that was included in the contract liability balance at January 1, 2022 was $ 2.1 million and $ 5.7 million, respectively, and represented primarily revenue from our fixed fee and subscription contracts.

Remaining Performance Obligations

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.

As of June 30, 2022, the Company had $ 119.1 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 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.

For both the three and six

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

months ended June 30, 2022, 0.0 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Weighted average common shares

5 unchanged sentences

NOTE 7—INCOME TAXES

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.

The Company’s effective tax rate for the three and six months ended June 30, 2022 was 25.7 % and 28.9 % based on pretax income of $ 6.7 million and $ 13.9 million, respectively.

The Company’s effective tax rate for the quarter ended June 30, 2022 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 %.

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, 2022 and December 31, 2021.

All material liabilities of which management is aware are properly reflected in the financial statements at June 30, 2022 and December 31, 2021.

NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION

1 unchanged sentence

The Company operates principally in the Americas, Europe and Asia Pacific.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Geographical revenue information for the segment is as follows:

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.

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

On March 10, 2020, the Company amended and restated its senior secured credit facility to include a $ 86.0 million term facility and to increase the revolving commitments per the revolving facility (the “2020 Credit Agreement”) from $ 30.0 million to $ 54.0 million.

On March 10, 2020, the Company amended and restated its senior secured credit facility to include a $ 86.0 million term facility and to increase the revolving commitments per the revolving facility (as amended by that certain First Amendment to Credit Agreement, dated as of June 1, 2022, the “2020 Credit Agreement”) from $ 30.0 million to $ 54.0 million.

The material terms under the 2020 Credit Agreement are as follows:

5 unchanged sentences

● The term loan is repayable in nineteen consecutive quarterly installments of $ 1,075,000 each that commenced on June 30, 2020 and a final payment of the outstanding principal amount of the term loan on the Maturity Date.

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

● The senior secured credit facility contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or disposition of property or assets, investments (including loans, advances, guarantees and acquisitions), transactions with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business.

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business.

In addition, the Company is required to comply with a total leverage ratio and fixed charge coverage ratio.

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

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 Company’s financial statements include outstanding borrowings of $ 72.3 million and $ 74.5 million at June 30, 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 $ 72.3 million and $ 73.6 million at March 31, 2022 and December 31, 2021, respectively.

The fair value of the Company's outstanding borrowings is approximately $ 70.7 million and $ 73.6 million at June 30, 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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

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 incremental borrowing rate used to discount future cash flows is 3.8 % and 2.0 % at June 30, 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 and interest rates.

As of June 30, 2022 and December 31, 2021, there were no borrowings under the revolver.

The Company is currently in compliance with its financial covenants.

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