What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-08 · 89 added, 55 removed, 267 unchanged (35% 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 47,756 outstanding at June 30, 2022 and 49,362 shares issued and 48,856 outstanding at December 31, 2021

49,362 shares issued and 47,934 outstanding at September 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

Nine Months Ended

September 30,

Operating expenses

11 unchanged sentences

Comprehensive income:

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

Foreign currency translation, net of tax benefit of $ 629 , $ 303 , $ 1,515 , and $ 579 , respectively

Comprehensive income

5 unchanged sentences

Stockholders’

Balance December 31, 2021

Balance June 30, 2022

Other comprehensive loss

3 unchanged sentences

Accrued dividends on unvested shares

Cash dividends paid to shareholders

Cash dividends paid to shareholders ($ 0.04 per share)

Stock based compensation

Balance June 30, 2022

Balance September 30, 2022

Comprehensive

5 unchanged sentences

Issuance of treasury shares for RSUs vested

Issuance of common stock for RSUs vested

Accrued dividends on unvested shares

Cash dividends paid to shareholders

Cash dividends paid to shareholders ($ 0.11 per share)

Stock based compensation

Balance September 30, 2022

Comprehensive

Stockholders’

Balance June 30, 2021

Other comprehensive loss

Treasury shares repurchased

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 ($ 0.03 per share)

Stock based compensation

Balance September 30, 2021

Comprehensive

Stockholders’

Balance December 31, 2020

Other comprehensive income

Treasury shares repurchased

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 ($ 0.06 per share)

Stock based compensation

Balance September 30, 2021

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

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

13 unchanged sentences

Contract liabilities

Accrued expenses

Accrued expenses and other liabilities

Net cash provided by operating activities

6 unchanged sentences

Payments related to tax withholding for stock-based compensation

Payment of contingent consideration

Cash dividends paid to shareholders

5 unchanged sentences

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

Supplemental disclosures of cash flow information:

Cash paid for:

Taxes, net of refunds

Non-cash investing and financing activities:

17 unchanged sentences

NOTE 2—BASIS OF PRESENTATION

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 accompanying unaudited condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 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 September 30, 2022 and the results of operations for the three and nine months ended September 30, 2022 and 2021 and the cash flows for the nine months ended September 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 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.

Operating results for the three and nine months ended September 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 June 30, 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 September 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.

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

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

June 30, 2022

September 30, 2022

Cash equivalents

7 unchanged sentences

(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

The contingent consideration associated with the 2020 acquisition of Neuralify was fully paid in July 2022.

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

Nine Months Ended

September 30,

Beginning Balance

Neuralify earnout adjustment (1)

Neuralify earnout payment

Ending Balance

(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 $ 72.3 million at June 30, 2022 and $ 74.5 million at December 31, 2021, which are carried at amortized cost.

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

The Company’s financial instruments include outstanding borrowings of $ 71.3 million at September 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 value of the Company's outstanding borrowings is approximately $ 69.1 million and $ 73.6 million at September 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 3.8 % and 2.0 % at June 30, 2022 and December 31, 2021, respectively.

The incremental borrowing rate used to discount future cash flows is 5.3 % and 2.0 % at September 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.

7 unchanged sentences

The primary reason for the acquisition was to expand the capabilities of ISG’s pure-play automation service line, ISG Automation.

The purchase price was comprised of $ 2.3 million of cash consideration paid at closing and certain former employees of Neuralify, LLC will also have the right to receive additional consideration paid via earn-out payments during the next 18 months , if certain financial targets are met.

The purchase price was comprised of $ 2.3 million of cash consideration paid at closing and certain former employees of Neuralify, LLC also had the right to receive additional consideration paid via earn-out payments during the next 18 months , if certain financial targets were met.

In October 2021, the 18 -month period was extended six months to July 2022.

7 unchanged sentences

The primary factors that drove the goodwill recognized, the majority of which is deductible for tax purposes, are the inclusion of legacy Neuralify workforce and know-how which expands the Company’s pure-play automation service line, ISG Automation.

Costs associated with this acquisition are included in the selling, general and administrative expenses in the Consolidated Statement of Income and Comprehensive Income and totaled $ 0.1 million during the year ended December 31, 2020.

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

6 unchanged sentences

Net assets acquired

The Consolidated Statement of Income and Comprehensive Income includes the results of the Neuralify acquisition subsequent to the closing.

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 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

8 unchanged sentences

If services are determined to be distinct, they are accounted for as separate performance obligations.

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 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.

1 unchanged sentence

For contracts with multiple performance obligations, including our managed service (GovernX) implementation, software and implementation, and research and subscription contracts, the Company allocates the transaction price to each performance obligation using our best estimate of the standalone selling price, or SSP, of each distinct good or service in the contract.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

Our contracts may include promises to transfer multiple services and products to a client.

12 unchanged sentences

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 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.

Revenue recognized for the three and nine months ended September 30, 2022 that was included in the contract liability balance at January 1, 2022 was $ 0.7 million and $ 6.4 million, respectively, and represented primarily revenue from our fixed fee and subscription contracts.

Remaining Performance Obligations

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.

As of September 30, 2022, the Company had $ 123.4 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 both the three and six

For both the three and nine months ended September 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.

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted average common shares

5 unchanged sentences

NOTE 7—INCOME TAXES

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 Company’s effective tax rate for the three and nine months ended September 30, 2022 was 18.0 % and 25.4 % based on pretax income of $ 6.8 million and $ 20.7 million, respectively.

The Company’s effective tax rate for the quarter ended September 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 nine months ended September 30, 2021 was 34.9 % and 27.7 %.

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.

1 unchanged sentence

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 June 30, 2022 and December 31, 2021.

All material liabilities of which management is aware are properly reflected in the financial statements at September 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.

Geographical revenue information for the segment is as follows:

Three Months Ended

Nine Months Ended

September 30,

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(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.

10 unchanged sentences

● 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.

● 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

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 $ 72.3 million and $ 74.5 million at June 30, 2022 and December 31, 2021, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of $ 71.3 million and $ 74.5 million at September 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 $ 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 3.8 % and 2.0 % at June 30, 2022 and December 31, 2021, respectively.

The fair value of the Company's outstanding borrowings is approximately $ 69.1 million and $ 73.6 million at September 30, 2022 and December 31, 2021, respectively.

The fair values of debt have been

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

(tabular amounts in thousands, except per share data)

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 5.3 % and 2.0 % at September 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.

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

The Company is currently in compliance with its financial covenants.

NOTE 11—SUBSEQUENT EVENT

On October 31, 2022, a subsidiary of the Company executed an Asset Purchase Agreement with Change 4 Growth, LLC and consummated the acquisition of substantially all of the assets, and assumed certain liabilities, of Change 4 Growth, LLC.

The purchase price was comprised of $ 3.0 million of cash consideration paid at closing, $ 0.6 million of shares of ISG common stock issued promptly after closing and Change 4 Growth, LLC will also have the right to receive additional consideration paid via earn-out payments during the next 26 months , if certain financial targets are met.

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