What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-08 · 73 added, 65 removed, 306 unchanged (31% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

24 unchanged sentences

10,000 shares authorized;

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

49,472 shares issued and 48,490 outstanding at June 30, 2023 and 49,472 shares issued and 48,300 outstanding at December 31, 2022

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

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 (loss) gain, net of tax benefit (expense) of $ 56 , $ 717 , $( 42 ) , and $ 886 , respectively

Foreign currency translation loss, net of tax benefit of $ 128 , $ 629 , $ 86 and $ 1,515 , respectively

Comprehensive income

5 unchanged sentences

Stockholders’

Balance March 31, 2023

Other comprehensive income

Balance June 30, 2023

Other comprehensive loss

Treasury shares repurchased

4 unchanged sentences

Stock based compensation

Balance June 30, 2023

Balance September 30, 2023

Comprehensive

9 unchanged sentences

Stock based compensation

Balance June 30, 2023

Balance September 30, 2023

INFORMATION SERVICES GROUP, INC.

3 unchanged sentences

Stockholders’

Balance March 31, 2022

Balance June 30, 2022

Other comprehensive loss

3 unchanged sentences

Accrued dividends on unvested shares

Dividend Payable

Cash dividends paid to shareholders ($ 0.04 per share)

Stock based compensation

Balance June 30, 2022

Balance September 30, 2022

Comprehensive

8 unchanged sentences

Stock based compensation

Balance June 30, 2022

Balance September 30, 2022

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

2 unchanged sentences

Amortization of intangible assets

Deferred tax expense (benefit) from stock issuances

Deferred tax benefit from stock issuances

Write-off of deferred financing costs

10 unchanged sentences

Accrued expenses and other liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities

42 unchanged sentences

NOTE 2—BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 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 June 30, 2023, the results of operations for the three and six months ended June 30, 2023 and 2022 and the cash flows for the six months ended June 30, 2023 and 2022.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 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, 2023, the results of operations for the three and nine months ended September 30, 2023 and 2022 and the cash flows for the nine months ended September 30, 2023 and 2022.

The condensed consolidated balance sheet as of December 31, 2022 has been derived from the Company’s audited consolidated financial statements.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 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”).

14 unchanged sentences

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 as of June 30, 2023 and December 31, 2022 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 as of September 30, 2023 and December 31, 2022 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 goodwill, intangible assets and other long-lived assets and assets acquired and liabilities assumed in a business combination.

12 unchanged sentences

Basis of Fair Value Measurements

June 30, 2023

September 30, 2023

Cash equivalents

4 unchanged sentences

Contingent consideration (1)

(1) The current and noncurrent contingent consideration are included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of June 30, 2023 and December 31, 2022.

The following table represents the change in the contingent consideration liability during the six months ended June 30, 2023:

Six Months Ended

(1) The current and noncurrent contingent consideration are included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of September 30, 2023 and December 31, 2022.

The following table represents the change in the contingent consideration liability during the nine months ended September 30, 2023:

Nine Months Ended

September 30,

Beginning Balance

2 unchanged sentences

Ending Balance

The Company’s financial instruments include outstanding borrowings of $ 79.2 million both as of June 30, 2023, and December 31, 2022, which are carried at amortized cost.

The Company’s financial instruments include outstanding borrowings of $ 79.2 million both as of September 30, 2023, and December 31, 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’s outstanding borrowings was approximately $ 79.9 million and $ 76.5 million as of June 30, 2023 and December 31, 2022, respectively.

The fair value of the Company’s outstanding borrowings was approximately $ 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 6.9 % and 6.3 % as of June 30, 2023 and December 31, 2022, respectively.

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 against the revolver and subsequently repaid $ 5.0 million during the quarter.

The Company is currently in compliance with its financial covenants.

INFORMATION SERVICES GROUP, INC.

7 unchanged sentences

NOTE 4 — ACQUISITIONS

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 was 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”, is being depreciated over four years .

Change 4 Growth Acquisition

7 unchanged sentences

Total allocable purchase price

This acquisition 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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

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

5 unchanged sentences

The primary factors that drove the goodwill recognized, the majority of which is deductible for tax purposes, were the inclusion of the legacy Change 4 Growth workforce and associated organizational change management expertise to enhance and expand the offerings of the ISG Enterprise Change service line.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

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.

17 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

10 unchanged sentences

See the table below for a breakdown of contract assets and contract liabilities:

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

September 30,

Contract assets

Contract liabilities

Revenue recognized for the three and six months ended June 30, 2023 that was included in the contract liability balance at January 1, 2023 was $ 1.8 million, and $ 5.3 million respectively, and primarily represented revenue from our subscription contracts.

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 June 30, 2023, the Company had $ 126.0 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

As of September 30, 2023, the Company had $ 109.2 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 six months ended June 30, 2023 and 2022, 0.6 million and 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

For the three months and nine months ended September 30, 2023, 0.5 million and 1.2 million restricted stock units, respectively, and for both the three and nine months ended September 30, 2022, 0.0 million restricted stock units, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

The following table sets 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, 2023 was 37.1 % and 34.7 %, respectively, based on pretax income of $ 3.7 million and $ 8.9 million, respectively.

The Company’s effective tax rate for the quarter ended June 30, 2023 was impacted by non-deductible expenses and 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 three and six months ended June 30, 2022 was 25.7 % and 28.9 %, respectively.

The Company’s effective tax rate for the three and nine months ended September 30, 2023 was 33.2 % and 34.1 %, respectively, based on pretax income of $ 4.8 million and $ 13.7 million, respectively.

The Company’s effective tax rate for the quarter ended September 30, 2023 was impacted by non-deductible expenses and 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 three and nine

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

months ended September 30, 2022 was 18.0 % and 25.4 %, respectively.

The difference is primarily due to the impact of earnings and losses in certain foreign jurisdictions and the impact of the 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 as of June 30, 2023 and December 31, 2022.

All material liabilities of which management is aware are properly reflected in the financial statements as of September 30, 2023 and December 31, 2022.

Change 4 Growth Contingent Consideration

As of June 30, 2023, the Company has recorded a liability of $ 4.2 million representing the estimated fair value of contingent consideration related to the acquisition of Change 4 Growth, which is classified as “Accrued expense and other current liabilities” and “Other liabilities” on the consolidated balance sheet.

As of September 30, 2023, the Company has recorded a liability of $ 4.2 million representing the estimated fair value of contingent consideration related to the acquisition of Change 4 Growth, which is classified as “Accrued expenses and other current liabilities” and “Other liabilities” on the consolidated balance sheet.

In April 2023, the Company made a contingent consideration payment of $ 1.5 million.

2 unchanged sentences

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

Nine Months Ended

September 30,

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

3 unchanged sentences

The material terms under the 2023 Credit Agreement are as follows:

● The revolving credit facility has a maturity date of February 22, 2028 (the “Maturity Date”).

Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:

● The revolving credit facility has a maturity date of February 22, 2028.

● 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.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

● 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.

4 unchanged sentences

In addition, the Company is required to comply with a consolidated leverage ratio and consolidated interest coverage ratio.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

● 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 $ 79.2 million both as of June 30, 2023 and December 31, 2022, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of $ 79.2 million both as of September 30, 2023 and December 31, 2022, which are carried at amortized cost.