What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-08 compared with 2024-08-06 · 112 added, 87 removed, 335 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

2 unchanged sentences

Prepaid expenses and other current assets

Held for sale current assets

Total current assets

4 unchanged sentences

Deferred tax assets

Held for sale non-current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Accrued expenses and other current liabilities

Held for sale current liabilities

Total current liabilities

Long-term debt, net of current maturities

Long-term debt

Deferred tax liabilities

1 unchanged sentence

Other liabilities

Held for sale non-current liabilities

Total liabilities

5 unchanged sentences

100,000 shares authorized;

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

49,658 shares issued and 49,018 outstanding at September 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

Nine Months Ended

September 30,

Operating expenses

5 unchanged sentences

Interest expense

Foreign currency transaction gain (loss)

Income (Loss) before taxes

Foreign currency transaction loss

Income before taxes

Income tax provision

2 unchanged sentences

Earnings (loss) per share:

Comprehensive (loss) income:

Comprehensive income:

Net income (loss)

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(In thousands, except per share data)

Comprehensive

Stockholders’

Balance March 31, 2024

Balance June 30, 2024

Other comprehensive income

2 unchanged sentences

Issuance of treasury shares for RSUs vested

Issuance of shares for Change 4 Growth

Accrued dividends on unvested shares

2 unchanged sentences

Stock based compensation

Balance June 30, 2024

Balance September 30, 2024

Comprehensive

1 unchanged sentence

Balance December 31, 2023

Other comprehensive loss

Other comprehensive income

Treasury shares repurchased

6 unchanged sentences

Stock based compensation

Balance June 30, 2024

Balance September 30, 2024

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(In thousands, except per share data)

Comprehensive

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

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

16 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities

43 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 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.

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

Operating results for the three and nine months ended September 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”).

2 unchanged sentences

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

Accordingly, the Company recorded a $ 0.5 million adjustment in the prior quarter 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 the second quarter was not material for the three and six months period ended June 30, 2024.

The error is also not material to the nine months ended September 30, 2024 and is not expected to be material to the forecasted 2024 annual period.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

8 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, 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 September 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.

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 and liabilities (as applicable) measured at fair value on a recurring basis at the dates indicated:

Basis of Fair Value Measurements

June 30, 2024

September 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 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

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

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

Nine Months Ended

September 30,

Beginning Balance

Change 4 Growth earnout adjustment (1)

Change 4 Growth contingent consideration payment

Ventana earnout adjustment (1)

Ventana contingent consideration payment

1 unchanged sentence

Ending Balance

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.

(1) Change 4 Growth and Ventana earnout adjustments relate to the expected target achievement not being met for certain milestones specific to the acquisitions.

The Company’s accompanying unaudited condensed consolidated financial instruments include outstanding borrowings of approximately $ 66.2 million and $ 79.2 million as of September 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 June 30, 2024 and December 31, 2023, respectively.

The fair value of the Company’s outstanding borrowings was approximately $ 66.9 million and $ 79.8 million as of September 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 7.4 % and 6.9 % as of June 30, 2024 and December 31, 2023, respectively.

The incremental borrowing rate used to discount future cash flows was 6.7 % and 6.9 % as of September 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.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

Recently Issued Accounting Pronouncements

6 unchanged sentences

The Company is currently evaluating the impact on our consolidated financial statements.

Income Statement Disaggregation

In November 2024, the FASB issued updated guidance ASU 2024-03, to improve the disaggregation of Income Statement Expenses.

This guidance requires additional disclosure of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses.

The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted for annual financial statements that have not yet been issued.

The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s financial statement disclosures.

NOTE 4 — ACQUISITIONS

11 unchanged sentences

The 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.

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

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

Accounts receivable

2 unchanged sentences

Net assets acquired

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

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 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.

Costs associated with this acquisition are included in selling, general and administrative expense in the Consolidated Statements of Income and Comprehensive Income appearing in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2023 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:

22 unchanged sentences

Net assets acquired

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

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:

Costs associated with this acquisition are included in selling, general and administrative expense in the Consolidated Statements of Income and Comprehensive Income appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and totaled $ 0.2 million during year ended December 31, 2022.

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

Purchase Price

4 unchanged sentences

Total intangible assets

NOTE 5—HELD-FOR-SALE-CLASSIFICATION

In September 2024, the Company entered into an agreement to sell the Automation service line to UST for $ 27 million, of which $ 20 million will be paid in cash and $ 7 million will be held in escrow to be released upon the completion of certain conditions specified in the final agreement which include achievement of revenue milestones through the first quarter of 2025 and obtaining client consents by the end of the fourth quarter of 2024.

The assets and liabilities of the Automation service line have been classified as held for sale in the Consolidated Balance Sheet as of September 30, 2024 and are measured at the lower of it carrying amount or fair value less costs to sell.

The sale closed in the fourth quarter of 2024.

The Company expects that the sale proceeds less costs to sell will exceed the preliminary estimate of the carrying value of the net assets for the business.

The sale consideration is subject to certain post-closing adjustments, which primarily relate to cash, indebtedness and working capital balances.

The following table summarizes the components of assets and liabilities held-for-sale on the Consolidated Balance Sheet:

September 30,

Accounts receivable and contract assets, net of allowance

Prepaid expenses and other current assets

Assets held for sale- current assets

Intangible assets

Deferred tax assets

Assets held for sale non-current assets

Total Assets held for sale

Accounts payable

Contract liabilities

Accrued expenses and other current liabilities

Assets held for sale current liabilities

Other liabilities

Assets held for sale non-current liabilities

Total Liabilities held for sale

As a result of the agreement to sell the Automation service line to UST in September 2024, the Company allocated goodwill to the Automation service line using a relative fair value method.

In addition, we completed an assessment of any potential goodwill impairment immediately prior and subsequent to the allocation and determined that no impairment existed.

We estimated the fair value of the Automation service line based on the terms and conditions of the sales agreement with UST which primarily reflected $ 20.0 million in cash, a fair value estimate of the $ 7.0 million held in escrow and an estimate for a working capital adjustment.

The fair value of the amounts held in escrow was estimated based on the probability of achieving revenue targets per the agreement based on forecasted revenues and of obtaining the required consents from clients.

As the escrow periods per the agreement are both less than 12 months, the fair value estimates related to these amounts were not present valued.

The amounts received from escrow are subject to change based on results.

Based on the valuations performed over the Automation service line and the remaining business, the fair values were determined to be in excess of the carrying value and therefore there was no impairment.

NOTE 6—REVENUE

9 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:

September 30,

Contract assets

Contract liabilities

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.

Revenue recognized for the three and nine months ended September 30, 2024 that was included in the contract liability balance at January 1, 2024 was $ 0.7 million, and $ 8.3 million respectively, and primarily representing revenue from our subscription contracts.

Remaining Performance Obligations

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.

As of September 30, 2024, the Company had $ 111.3 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

Accounts Receivable and contract assets

We are currently engaged in litigation with a client over a disputed accounts receivable balance for services rendered.

While we believe the balance of approximately $ 4.7 million is collectible, there is a reasonably possible risk of an unfavorable outcome.

NOTE 7—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, 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

For the three and nine months ended September 30, 2024, 1.1 million and 4.7 million restricted stock units, respectively, and for the three and nine months ended September 30, 2023, 0.5 million and 1.2 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 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,

Net income (loss)

7 unchanged sentences

NOTE 8—INCOME TAXES

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 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 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)

The Company’s effective tax rate for the three and nine months ended September 30, 2024 was 60.2 % and 112.9 %, respectively, based on pretax income of $ 2.9 million and $ 1.6 million, respectively.

The Company’s effective tax rate for the quarter ended September 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 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.

NOTE 9—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 June 30, 2024 and December 31, 2023.

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

Ventana Research Contingent Consideration

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.

As of September 30, 2024, the Company has recorded a liability of $ 0.7 million representing the estimated fair value of contingent consideration related to the acquisition of Ventana Research, which is classified as noncurrent and included in other liabilities on the condensed consolidated balance sheet.

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

Change 4 Growth Contingent Consideration

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.

As of September 30, 2024, the Company has recorded a liability of $ 0.5 million representing the estimated fair value of contingent consideration related to the acquisition of Change 4 Growth, which is 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

Nine Months Ended

September 30,

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

5 unchanged sentences

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

INFORMATION SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(tabular amounts in thousands, except per share data)

● 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, plus the applicable margin.

● 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, 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, plus the applicable margin.

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

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.

For the first nine 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 June 30, 2024 and December 31, 2023, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of approximately $ 66.2 million and $ 79.2 million as of September 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 June 30, 2024 and December 31, 2023, respectively.

The fair value of the Company’s outstanding borrowings was approximately $ 66.9 million and $ 79.8 million as of September 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 7.4 % and 6.9 % as of June 30, 2024 and December 31, 2023, respectively.

The incremental borrowing rate used to discount future cash flows was 6.7 % and 6.9 % as of September 30, 2024 and December 31, 2023, respectively.

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

During the nine months ended September 30, 2024, the Company borrowed $ 10.0 million and repaid $ 23.0 million of the revolver loan.

The Company is currently in compliance with its financial covenants.

NOTE 12—SUBSEQUENT EVENTS

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.

On October 1, 2024, the Company completed the sale of its Automation business line to UST Global Inc for $ 27 million in an all-cash transaction, of which million $ 20 million was paid in cash at closing and $ 7 million was placed in escrow;

$ 4 million of the escrowed amount will be released within 90 days of closing of the transaction based upon receipt of a consent, delivery of a notice, or the entering into a spin-off agreement with a list of clients whose contracts require one of the foregoing actions.

The remaining $ 3 million of the escrowed amount will be released following the end of the quarter ending March 31, 2025, based upon achievement of certain revenue targets by the divested Automation business for the period from October 1, 2024 to March 31, 2025.

On November 1, 2024 , the Company’s Board of Directors (the “Board”) approved a fourth-quarter dividend of $ 0.045 per share, payable December 20, 2024 , to shareholders of record as of December 3, 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