What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-10 · 101 added, 59 removed, 321 unchanged (33% of the section changed)

30 unchanged sentences

100,000 shares authorized;

49,472 shares issued and 48,329 outstanding at March 31, 2024 and 49,472 shares issued and 48,653 outstanding at December 31, 2023

49,658 shares issued and 48,903 outstanding at June 30, 2024 and 49,472 shares issued and 48,653 outstanding at December 31, 2023

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Operating expenses

2 unchanged sentences

Depreciation and amortization

Operating (loss) income

Operating income

Interest income

Interest expense

Foreign currency transaction loss

(Loss) income before taxes

Income tax (benefit) provision

Net (loss) income

Foreign currency transaction gain (loss)

Income (Loss) before taxes

Income tax provision

Net income (loss)

Weighted average shares outstanding:

(Loss) earnings per share:

Comprehensive (loss) income:

Net (loss) income

Foreign currency translation (loss) gain, net of tax expense of $( 50 ), and $( 97 ), respectively

Earnings (loss) per share:

Comprehensive (loss) income:

Net income (loss)

Foreign currency translation gain (loss), net of tax (expense) benefit of $( 40 ), $ 56 , $( 90 ) and $( 42 ), respectively

Comprehensive income (loss)

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

4 unchanged sentences

Stockholders’

Balance March 31, 2024

Other comprehensive income

Treasury shares repurchased

Proceeds from issuance of employee stock purchase plan (ESPP) shares

Issuance of treasury shares for RSUs vested

Issuance of shares for Change 4 Growth

Accrued dividends on unvested shares

Dividend payable

Cash dividends paid to shareholders ($ 0.045 per share)

Stock based compensation

Balance June 30, 2024

Comprehensive

Stockholders’

Balance December 31, 2023

3 unchanged sentences

Issuance of treasury shares for RSUs vested

Issuance of shares for Change 4 Growth

Accrued dividends on unvested shares

Dividend payable

Cash dividends paid to shareholders ($ 0.045 per share)

Stock based compensation

Balance June 30, 2024

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

INFORMATION SERVICES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

Comprehensive

Stockholders’

Balance March 31, 2023

Other comprehensive income

Treasury shares repurchased

Proceeds from issuance of ESPP shares

Issuance of treasury shares for RSUs vested

Accrued dividends on unvested shares

Cash dividends paid to shareholders ($ 0.045 per share)

Stock based compensation

Balance June 30, 2023

Comprehensive

1 unchanged sentence

Balance December 31, 2022

Other comprehensive gain

Impact of change in accounting policy (Note 3)

Other comprehensive loss

Impact of change in accounting policy

Treasury shares repurchased

4 unchanged sentences

Stock based compensation

Balance March 31, 2023

Balance June 30, 2023

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 (loss) income

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

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

Depreciation expense

Amortization of intangible assets

Deferred tax (benefit) expense from stock issuances

Deferred tax expense from stock issuances

Write-off of deferred financing costs

20 unchanged sentences

Payments related to tax withholding for stock-based compensation

Payment of contingent consideration

Cash dividends paid to shareholders

33 unchanged sentences

The accompanying unaudited condensed consolidated financial statements 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, 2024, the results of operations for the three months ended March 31, 2024 and 2023 and the cash flows for the three months ended March 31, 2024 and 2023.

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, 2024, the results of operations for the three and six months ended June 30, 2024 and 2023 and the cash flows for the six months ended June 30, 2024 and 2023.

The condensed consolidated balance sheet as of December 31, 2023 has been derived from the Company’s audited consolidated financial statements.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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”).

Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2023, which are included in the Company’s 2023 Annual Report on Form 10-K filed with the SEC.

Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC.

Out-of-Period Adjustment

In conjunction with the Company’s close process for the second quarter of 2024, management identified a $ 0.5 million error related to revenue incorrectly recognized during the third quarter of 2022.

Accordingly, the Company recorded a $ 0.5 million adjustment in the current period to reduce revenue.

Management evaluated the pre-tax impact of this error of $ 0.5 million on the Company’s previously reported interim and annual financial statements for Q3 2022 and full year 2022 and determined that the error was not material to any previously issued financial statements and that the out-of-period adjustment in June 30, 2024 for three and six months periods was not material to those periods and is not expected to be material to the forecasted 2024 annual period.

INFORMATION SERVICES GROUP, INC.

11 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 March 31, 2024 and December 31, 2023 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 June 30, 2024 and December 31, 2023 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

March 31, 2024

June 30, 2024

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 March 31, 2024 and December 31, 2023.

The following table represents the change in the contingent consideration liability during the three months ended March 31, 2024:

Three Months Ended

(1) The current and noncurrent contingent consideration are included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of June 30, 2024 and December 31, 2023.

The following table represents the change in the contingent consideration liability during the six months ended June 30, 2024:

Six Months Ended

Beginning Balance

Change 4 Growth contingent consideration payment

Ventana contingent consideration payment

Accretion of contingent consideration

Ending Balance

The Company’s financial instruments include outstanding borrowings of approximately $ 74.2 million and $ 79.2 million as of March 31, 2024, and December 31, 2023, respectively, which are carried at amortized cost.

The Company’s accompanying unaudited condensed consolidated financial instruments include outstanding borrowings of approximately $ 74.2 million and $ 79.2 million as of June 30, 2024, and December 31, 2023, 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 was approximately $ 74.8 million and $ 79.8 million as of March 31, 2024 and December 31, 2023, respectively.

The fair value of the Company’s outstanding borrowings was approximately $ 74.8 million and $ 79.8 million as of June 30, 2024 and December 31, 2023, 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 7.2 % and 6.9 % as of March 31, 2024 and December 31, 2023, respectively.

The incremental borrowing rate used to discount future cash flows was 7.4 % and 6.9 % as of June 30, 2024 and December 31, 2023, 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.

7 unchanged sentences

Segment Reporting

In November 2023, the FASB issued amended guidance on segment reporting to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analysis.

This amended guidance is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024.

22 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 Ventana Research workforce and allowing the Company to penetrate an entirely new market sector for software technology vendors.

Costs associated with this acquisition are included in the selling, general and administrative expense in the Consolidated Statements of Income and Comprehensive Income and totaled $ 0.1 million during the year ended December 31, 2023.

Costs associated with this acquisition are included in selling, general and administrative expense on the Form 10-K Consolidated Statements of Income and Comprehensive Income and totaled $ 0.1 million during the year ended December 31, 2023.

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

26 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.

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

33 unchanged sentences

Contract liabilities

Revenue recognized for the three months ended March 31, 2024 that was included in the contract liability balance at January 1, 2024 was $ 5.7 million, primarily representing revenue from our subscription contracts.

Revenue recognized for the three and six months ended June 30, 2024 that was included in the contract liability balance at January 1, 2024 was $ 1.9 million, and $ 7.6 million respectively, and primarily representing revenue from our subscription contracts.

Remaining Performance Obligations

As of March 31, 2024, the Company had $ 112.5 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

As of June 30, 2024, the Company had $ 118.9 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 months ended March 31, 2024 and 2023, 4.2 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 the three and six months ended June 30, 2024, 1.8 million and 4.7 million restricted stock units, respectively, and for the three and six months ended June 30, 2023, 0.6 million and 0.7 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.

2 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended March 31,

Net (loss) income

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Weighted average common shares

(Loss) earnings per share

Net (loss) income

Earnings (loss) per share

Net income (loss)

Basic weighted average common shares

1 unchanged sentence

Diluted weighted average common shares

Diluted (loss) earnings per share

Diluted earnings (loss) per share

NOTE 7—INCOME TAXES

The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 6.4 % and 32.9 %, respectively, based on pretax loss and income of $ 3.6 million and $ 5.2 million, respectively.

The Company’s effective tax rate for the quarter ended March 31, 2024 was impacted by non-deductible expenses and earnings and losses in certain foreign jurisdictions.

The Company’s effective tax rate for the three and six months ended June 30, 2024 was 12.0 % and ( 3.7 %), respectively, based on pretax income and loss of $ 2.3 million and $ 1.3 million, respectively.

The Company’s effective tax rate for the quarter ended June 30, 2024 was impacted by non-deductible expenses and earnings and losses in certain foreign jurisdictions.

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 provision (benefit) for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period.

When projected “ordinary” income or loss for the full year is close to breakeven, the estimated annual effective tax rate can become volatile due to small changes, resulting in an unreliable estimate of tax for the reporting period.

When projected “ordinary” income or loss for the full year is close to breakeven, the estimated annual effective tax rate can become volatile due to insignificant changes, resulting in an unreliable estimate of tax for the reporting period.

In such instances, the Company will calculate the interim income tax provision or benefit using a discrete effective tax rate method, as allowed by ASC 740-270 “Income Taxes, Interim Reporting,” based solely on the year-to-date pretax income or loss as adjusted for permanent differences on a pro rata basis.

For the first quarter ended March 31, 2024, we utilized a discrete effective tax rate method to calculate taxes due to circumstances described above where the estimated annual effective tax rate did not provide a reliable estimate.

For the second quarter ended June 30, 2024, the Company’s projected “ordinary” income or loss for the full year was no longer close to breakeven, decreasing the volatility of the estimated annual effective tax rate resulting in a reliable estimate of tax for the reporting period to continue to estimate the income taxes during interim reporting periods has historically been.

For the six months ended June 30, 2024, the Company projected “ordinary” income or loss for the full year was not close to breakeven, therefore, the estimated annual effective tax rate was not considered volatile due to small changes, resulting in a reliable estimate of tax for the reporting period, the Company decided to use the annual effective tax rate to calculate the income tax for interim period as well as the impact of earnings and loss in certain foreign jurisdiction and the impact of the vesting of restricted stock units.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

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 as of March 31, 2024 and December 31, 2023.

All material liabilities of which management is aware are properly reflected in the financial statements as of June 30, 2024 and December 31, 2023.

Ventana Research Contingent Consideration

As of March 31, 2024, the Company has recorded a liability of $ 1.7 million representing the estimated fair value of contingent consideration related to the acquisition of Ventana Research, of which $ 0.2 million was classified as current and included in accrued expenses on the consolidated balance sheet.

As of June 30, 2024, the Company has recorded a liability of $ 1.5 million representing the estimated fair value of contingent consideration related to the acquisition of Ventana Research, of which $ 0.8 million was classified as current and included in accrued expenses on the condensed consolidated balance sheet.

The Company paid $ 0.2 million in April 2024 related to 2023 performance.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

Change 4 Growth Contingent Consideration

As of March 31, 2024, 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, of which $ 2.2 million was classified as current and included in accrued expenses on the consolidated balance sheet.

As of June 30, 2024, the Company has recorded a liability of $ 2.0 million representing the estimated fair value of contingent consideration related to the acquisition of Change 4 Growth, of which $ 2.0 million was classified as current and included in accrued expenses on the condensed consolidated balance sheet.

The Company paid $ 2.2 million in April 2024, which was comprised of $ 1.5 million of cash consideration and $ 0.7 million of shares of ISG common stock related to 2023 performance.

4 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.

1 unchanged sentence

NOTE 10—FINANCING ARRANGEMENTS AND LONG-TERM DEBT

On February 22, 2023, the Company amended and restated its senior secured credit facility to increase the revolving commitments per the revolving facility from $ 54.0 million to $ 140.0 million and eliminate its term loan (the “2023 Credit Agreement”).

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

1 unchanged sentence

● 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.

● 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.

● 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) Term SOFR, plus 1.0 % ), plus the applicable margin (as defined below), or (ii) Term SOFR (which is the Term SOFR screen rate for the relevant interest period plus a credit spread adjustment of 0.10 % ) as determined by the administrative agent,

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

plus the applicable margin.

● 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.

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

During the first quarter of 2024, the applicable margin was increased to a percentage equal to 0.75 % for the revolving loans maintained as Base Rate loans or 1.75 % for the revolving loans maintained as Term SOFR loans.

For the first six months of 2024, the applicable margin was increased to a percentage equal to 1 % for the revolving loans maintained as Base Rate loans or 2 % for the revolving loans maintained as Term SOFR loans.

● 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 dispositions 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.

1 unchanged sentence

● 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 approximately $ 74.2 million and $ 79.2 million as of March 31, 2024 and December 31, 2023, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of approximately $ 74.2 million and $ 79.2 million as of June 30, 2024 and December 31, 2023, 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 was approximately $ 74.8 million and $ 79.8 million as of March 31, 2024 and December 31, 2023, respectively.

The fair value of the Company’s outstanding borrowings was approximately $ 74.8 million and $ 79.8 million as of June 30, 2024 and December 31, 2023, 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 7.2 % and 6.9 % as of March 31, 2024 and December 31, 2023, respectively.

The incremental borrowing rate used to discount future cash flows was 7.4 % and 6.9 % as of June 30, 2024 and December 31, 2023, respectively.

During the three months ended March 31, 2024, the Company repaid $ 5.0 million of the revolver loan.

During the six months ended June 30, 2024, the Company borrowed $ 5.0 million and repaid $ 10.0 million of the revolver loan.

The Company is currently in compliance with its financial covenants.

NOTE 11—SUBSEQUENT EVENTS

On May 7, 2024, the Company’s Board of Directors (the “Board”) approved a second-quarter dividend of $ 0.045 per share, payable July 5, 2024, to shareholders of record as of June 14, 2024.

On August 2, 2024, the Company’s Board of Directors (the “Board”) approved a third-quarter dividend of $ 0.045 per share, payable October 4, 2024, to shareholders of record as of September 6, 2024.

The dividends are accounted for as a decrease to Stockholders’ Equity.

1 unchanged sentence

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