Information Services Group Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ​ INFORMATION SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par value) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ​ 2024 2023 ASSETS ​ ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 9,690 ​ $ 22,636 ​ Accounts receivable and contract assets, net of allowance of $ 5,427 and $ 5,288 , respectively ​ 60,690 ​ 82,117 ​ Prepaid expenses and other current assets ​ 10,449 ​ 8,091 ​ Held for sale current assets ​ ​ 16,060 ​ ​ — ​ Total current assets ​ 96,889 ​ 112,844 ​ Restricted cash ​ 89 ​ 173 ​ Furniture, fixtures and equipment, net ​ 6,262 ​ 6,446 ​ Right-of-use lease assets ​ 6,161 ​ 7,473 ​ Goodwill ​ 87,545 ​ 97,232 ​ Intangible assets, net ​ 3,936 ​ 12,615 ​ Deferred tax assets ​ 5,502 ​ 4,775 ​ Other assets ​ 4,550 ​ 5,787 ​ Held for sale non-current assets ​ ​ 16,212 ​ ​ — ​ Total assets ​ $ 227,146 ​ $ 247,345 ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 8,775 ​ $ 11,302 ​ Contract liabilities ​ 9,880 ​ ​ 9,521 ​ Accrued expenses and other current liabilities ​ 22,723 ​ ​ 25,451 ​ Held for sale current liabilities ​ ​ 7,849 ​ ​ — ​ Total current liabilities ​ 49,227 ​ ​ 46,274 ​ Long-term debt ​ 66,175 ​ ​ 79,175 ​ Deferred tax liabilities ​ 2,542 ​ ​ 2,384 ​ Operating lease liabilities ​ 3,946 ​ ​ 5,287 ​ Other liabilities ​ 5,826 ​ ​ 12,143 ​ Held for sale non-current liabilities ​ ​ 2,872 ​ ​ — ​ Total liabilities ​ 130,588 ​ ​ 145,263 ​ Commitments and contingencies (Note 9) ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.001 par value; 10,000 shares authorized; none issued ​ — ​ ​ — ​ Common stock, $ 0.001 par value; 100,000 shares authorized; 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 ​ 50 ​ ​ 49 ​ Additional paid-in capital ​ 210,468 ​ ​ 217,684 ​ Treasury stock ( 640 and 819 common shares, respectively, at cost) ​ ( 2,121 ) ​ ​ ( 3,959 ) ​ Accumulated other comprehensive loss ​ ( 8,933 ) ​ ​ ( 8,989 ) ​ Accumulated deficit ​ ( 102,906 ) ​ ​ ( 102,703 ) ​ Total stockholders’ equity ​ 96,558 ​ ​ 102,082 ​ Total liabilities and stockholders’ equity ​ $ 227,146 ​ $ 247,345 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. 2 INFORMATION SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2024 2023 ​ 2024 2023 Revenues ​ $ 61,277 ​ $ 71,773 ​ $ 189,808 ​ $ 224,868 Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct costs and expenses for advisors ​ 36,530 ​ 43,032 ​ 116,484 ​ 138,048 Selling, general and administrative ​ 18,855 ​ 20,992 ​ 63,026 ​ 63,992 Depreciation and amortization ​ 1,598 ​ 1,526 ​ 4,724 ​ 4,692 Operating income ​ 4,294 ​ 6,223 ​ 5,574 ​ 18,136 Interest income ​ 222 ​ 104 ​ 701 ​ 285 Interest expense ​ ( 1,604 ) ​ ( 1,533 ) ​ ( 4,672 ) ​ ( 4,676 ) Foreign currency transaction loss ​ ( 30 ) ​ ( 2 ) ​ ( 24 ) ​ ( 40 ) Income before taxes ​ 2,882 ​ 4,792 ​ 1,579 ​ 13,705 Income tax provision ​ 1,734 ​ 1,591 ​ 1,782 ​ 4,680 Net income (loss) ​ $ 1,148 ​ $ 3,201 ​ $ ( 203 ) ​ $ 9,025 Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 48,940 ​ 48,711 ​ 48,743 ​ 48,542 Diluted ​ 50,158 ​ 50,257 ​ 48,743 ​ 50,287 Earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.02 ​ $ 0.07 ​ $ ( 0.00 ) ​ $ 0.19 Diluted ​ $ 0.02 ​ $ 0.06 ​ $ ( 0.00 ) ​ $ 0.18 Comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 1,148 ​ $ 3,201 ​ $ ( 203 ) ​ $ 9,025 Foreign currency translation gain (loss), net of tax (expense) benefit of $( 82 ), $ 128 , $ 8 and $ 86 , respectively ​ 637 ​ ( 427 ) ​ 56 ​ ( 271 ) Comprehensive income (loss) ​ $ 1,785 ​ $ 2,774 ​ $ ( 147 ) ​ $ 8,754 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 3 INFORMATION SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Stock Loss Deficit Equity Balance June 30, 2024 ​ 49,658 ​ $ 50 ​ $ 211,854 ​ $ ( 2,753 ) ​ $ ( 9,570 ) ​ $ ( 104,054 ) ​ $ 95,527 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,148 ​ ​ 1,148 Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 637 ​ ​ — ​ ​ 637 Treasury shares repurchased ​ — ​ ​ — ​ ​ — ​ ​ ( 800 ) ​ ​ — ​ ​ — ​ ​ ( 800 ) Proceeds from issuance of employee stock purchase plan (ESPP) shares ​ — ​ ​ — ​ ​ ( 112 ) ​ ​ 303 ​ ​ — ​ ​ — ​ ​ 191 Issuance of treasury shares for RSUs vested ​ — ​ ​ — ​ ​ ( 1,129 ) ​ ​ 1,129 ​ ​ — ​ ​ — ​ ​ — Accrued dividends on unvested shares ​ — ​ ​ — ​ ​ ( 121 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 121 ) Dividend payable ​ — ​ ​ — ​ ​ ( 2,206 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,206 ) Cash dividends paid to shareholders ($ 0.045 per share) ​ — ​ ​ — ​ ​ ( 147 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 147 ) Stock based compensation ​ — ​ ​ — ​ ​ 2,329 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,329 Balance September 30, 2024 ​ 49,658 ​ $ 50 ​ $ 210,468 ​ $ ( 2,121 ) ​ $ ( 8,933 ) ​ $ ( 102,906 ) ​ $ 96,558 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Stock Loss Deficit Equity Balance December 31, 2023 ​ 49,472 ​ $ 49 ​ $ 217,684 ​ $ ( 3,959 ) ​ $ ( 8,989 ) ​ $ ( 102,703 ) ​ $ 102,082 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 203 ) ​ ​ ( 203 ) Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 56 ​ ​ — ​ ​ 56 Treasury shares repurchased ​ — ​ ​ — ​ ​ — ​ ​ ( 5,306 ) ​ ​ — ​ ​ — ​ ​ ( 5,306 ) Proceeds from issuance of ESPP shares ​ — ​ ​ — ​ ​ ( 235 ) ​ ​ 873 ​ ​ — ​ ​ — ​ ​ 638 Issuance of treasury shares for RSUs vested ​ — ​ ​ — ​ ​ ( 6,271 ) ​ ​ 6,271 ​ ​ — ​ ​ — ​ ​ — Issuance of shares for Change 4 Growth ​ 186 ​ ​ 1 ​ ​ 700 ​ ​ — ​ ​ — ​ ​ — ​ ​ 701 Accrued dividends on unvested shares ​ — ​ ​ — ​ ​ ( 23 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 23 ) Dividend payable ​ — ​ ​ — ​ ​ ( 2,206 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,206 ) Cash dividends paid to shareholders ($ 0.09 per share) ​ — ​ ​ — ​ ​ ( 4,871 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4,871 ) Stock based compensation ​ — ​ ​ — ​ ​ 5,690 ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,690 Balance September 30, 2024 49,658 ​ $ 50 ​ $ 210,468 ​ $ ( 2,121 ) ​ $ ( 8,933 ) ​ $ ( 102,906 ) ​ $ 96,558 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 4 INFORMATION SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Stock Loss Deficit Equity Balance June 30, 2023 ​ 49,472 ​ $ 49 ​ $ 221,094 ​ $ ( 5,128 ) ​ $ ( 9,521 ) ​ $ ( 103,033 ) ​ $ 103,461 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,201 ​ ​ 3,201 Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 427 ) ​ ​ — ​ ​ ( 427 ) Treasury shares repurchased ​ — ​ ​ — ​ ​ — ​ ​ ( 923 ) ​ ​ — ​ ​ — ​ ​ ( 923 ) Proceeds from issuance of ESPP shares ​ — ​ ​ — ​ ​ ( 63 ) ​ ​ 301 ​ ​ — ​ ​ — ​ ​ 238 Issuance of treasury shares for RSUs vested ​ — ​ ​ — ​ ​ ( 2,366 ) ​ ​ 2,366 ​ ​ — ​ ​ — ​ ​ — Accrued dividends on unvested shares ​ — ​ ​ — ​ ​ 427 ​ ​ — ​ ​ — ​ ​ — ​ ​ 427 Cash dividends paid to shareholders ($ 0.045 per share) ​ — ​ ​ — ​ ​ ( 2,345 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,345 ) Stock based compensation ​ — ​ ​ — ​ ​ 2,096 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,096 Balance September 30, 2023 49,472 ​ $ 49 ​ $ 218,843 ​ $ ( 3,384 ) ​ $ ( 9,948 ) ​ $ ( 99,832 ) ​ $ 105,728 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Treasury ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Stock Loss Deficit Equity Balance December 31, 2022 ​ 49,472 ​ $ 49 ​ $ 226,293 ​ $ ( 7,487 ) ​ $ ( 9,677 ) ​ $ ( 108,747 ) ​ $ 100,431 Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 9,025 ​ ​ 9,025 Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 271 ) ​ ​ — ​ ​ ( 271 ) Impact of change in accounting policy ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 110 ) ​ ​ ( 110 ) Treasury shares repurchased ​ — ​ ​ — ​ ​ — ​ ​ ( 4,455 ) ​ ​ — ​ ​ — ​ ​ ( 4,455 ) Proceeds from issuance of ESPP shares ​ — ​ ​ — ​ ​ ( 285 ) ​ ​ 1,004 ​ ​ — ​ ​ — ​ ​ 719 Issuance of treasury shares for RSUs vested ​ — ​ ​ — ​ ​ ( 7,554 ) ​ ​ 7,554 ​ ​ — ​ ​ — ​ ​ — Accrued dividends on unvested shares ​ — ​ ​ — ​ ​ 169 ​ ​ — ​ ​ — ​ ​ — ​ ​ 169 Cash dividends paid to shareholders ($ 0.13 per share) ​ — ​ ​ — ​ ​ ( 6,532 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 6,532 ) Stock based compensation ​ — ​ ​ — ​ ​ 6,752 ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,752 Balance September 30, 2023 49,472 ​ $ 49 ​ $ 218,843 ​ $ ( 3,384 ) ​ $ ( 9,948 ) ​ $ ( 99,832 ) ​ $ 105,728 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 5 INFORMATION SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2024 2023 Cash flows from operating activities ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ ( 203 ) ​ $ 9,025 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: ​ ​ ​ ​ ​ ​ Depreciation expense ​ 2,494 ​ 2,340 Amortization of intangible assets ​ 2,230 ​ 2,352 Deferred tax expense from stock issuances ​ ( 372 ) ​ ( 230 ) Write-off of deferred financing costs ​ ​ — ​ ​ 379 Amortization of deferred financing costs ​ 167 ​ 182 Stock-based compensation ​ 5,690 ​ 6,752 Change in fair value of contingent consideration ​ ​ ( 2,323 ) ​ ​ 77 Provisions for credit losses ​ ​ 1,098 ​ ​ 432 Deferred tax (benefit) provision ​ ( 136 ) ​ 125 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable and contract assets ​ 4,433 ​ ( 12,380 ) Prepaid expenses and other assets ​ ( 287 ) ​ ( 2,145 ) Accounts payable ​ ( 1,459 ) ​ ( 4,653 ) Contract liabilities ​ 545 ​ ( 370 ) Accrued expenses and other liabilities ​ 1,435 ​ 720 Net cash provided by operating activities ​ 13,312 ​ 2,606 Cash flows from investing activities ​ ​ ​ ​ ​ ​ Purchase of furniture, fixtures and equipment ​ ( 2,303 ) ​ ( 1,640 ) Net cash used in investing activities ​ ( 2,303 ) ​ ( 1,640 ) Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds from revolving facility (Note 11) ​ ​ 10,000 ​ ​ 84,175 Repayment of outstanding debt (Note 11) ​ ​ ( 23,000 ) ​ ​ ( 84,175 ) Proceeds from issuance of employee stock purchase plan shares ​ 637 ​ ​ 719 Debt financing costs ​ — ​ ​ ( 827 ) Payments related to tax withholding for stock-based compensation ​ ( 1,921 ) ​ ( 2,461 ) Payment of contingent consideration ​ ​ ( 1,657 ) ​ ​ ( 1,460 ) Cash dividends paid to shareholders ​ ​ ( 4,871 ) ​ ​ ( 6,532 ) Treasury shares repurchased ​ ( 3,385 ) ​ ( 1,994 ) Net cash used in financing activities ​ ( 24,197 ) ​ ( 12,555 ) Effect of exchange rate changes on cash ​ 158 ​ ( 265 ) Net decrease in cash, cash equivalents, and restricted cash ​ ( 13,030 ) ​ ( 11,854 ) Cash, cash equivalents , and restricted cash , beginning of period ​ 22,809 ​ 30,670 Cash, cash equivalents , and restricted cash , end of period ​ $ 9,779 ​ $ 18,816 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosures of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid for: ​ ​ ​ ​ ​ ​ Interest ​ $ 4,416 ​ $ 3,798 Taxes, net of refunds ​ $ 2,515 ​ $ 6,848 ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Issuance of treasury stock for vested restricted stock units ​ $ 6,271 ​ $ 7,554 ​ The accompanying notes are an integral part of these condensed consolidated financial statements . ​ ​ 6 ​ INFORMATION SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (tabular amounts in thousands, except per share data) (unaudited) ​ ​ NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS ​ Information Services Group, Inc. (Nasdaq: III) (the “Company,” “ISG,” “we,” “us” or “our”) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the top 100 enterprises in our markets, ISG is committed to helping corporations, public sector organizations and service and technology providers achieve operational excellence and faster growth. The Company specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. Based in Stamford, Connecticut, ISG employs over 1,500 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com. The content on our website is available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-Q or any other filings. The Company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. We continue to believe that our vision will be realized through the acquisition, integration and successful operation of market-leading brands within the data, analytics and advisory industry. ​ NOTE 2—BASIS OF PRESENTATION ​ 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 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 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”). 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 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. 7 ​ ​ ​ NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ Use of Estimates ​ The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the revenue recognition guidance for contracts in which control is transferred to the customer over time affect the amounts of revenues, expenses, contract assets and contract liabilities. Numerous internal and external factors can affect estimates. Estimates are also used for but are not limited to: allowance for credit losses, useful lives of furniture, fixtures and equipment and definite lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation and the valuation of stock-based compensation. ​ Restricted Cash ​ Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes. ​ Fair Value ​ 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. ​ Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy: ​ ● Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; ​ ● Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and ​ ● Level 3 measurements include those that are unobservable and of a highly subjective measure. ​ 8 ​ 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 ​ ​ ​ September 30, 2024 ​ ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents $ 43 $ — $ — $ 43 ​ Total $ 43 $ — $ — $ 43 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration (1) $ — $ — $ 1,214 $ 1,214 ​ Total $ — $ — $ 1,214 $ 1,214 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis of Fair Value Measurements ​ ​ ​ December 31, 2023 ​ ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents $ 7,067 $ — $ — $ 7,067 ​ Total $ 7,067 $ — $ — $ 7,067 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration (1) $ — $ — $ 5,894 $ 5,894 ​ Total $ — $ — $ 5,894 $ 5,894 ​ (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, ​ 2024 Beginning Balance ​ $ 5,894 Change 4 Growth earnout adjustment (1) ​ ​ ( 1,571 ) Change 4 Growth contingent consideration payment ​ ​ ( 2,200 ) Ventana earnout adjustment (1) ​ ​ ( 818 ) Ventana contingent consideration payment ​ ​ ( 157 ) Accretion of contingent consideration ​ 66 Ending Balance ​ $ 1,214 (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 $ 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 6.7 % and 6.9 % as of September 30, 2024 and 9 ​ 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. ​ Recently Issued Accounting Pronouncements ​ Income Taxes In December 2023, the Financial Accounting Standards Board (“FASB”) issued updated guidance to enhance the transparency of income tax disclosure by requiring disaggregated information about an entity’s effective tax rate reconciliation, as well as information on taxes paid. This updated guidance is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact on our consolidated financial statements. ​ 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 analyses. This amended guidance is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. 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 ​ Ventana Research Acquisition On October 31, 2023, a subsidiary of the Company executed an Asset Purchase Agreement with Ventana Research, Inc. (“Ventana Research”) and consummated the acquisition of substantially all assets, and assumed certain liabilities, of Ventana Research. The purchase price was comprised of $ 1.0 million of cash consideration paid at closing. Ventana Research will also have the right to receive additional consideration paid via earn-out payments, if certain financial targets are met. At the agreement date, the Company estimated such earn-out payment would be $ 1.7 million. Please see Note 9—Commitments and Contingencies—Ventana Research Contingent Consideration for more. The following table summarizes the preliminary consideration transferred to acquire Ventana Research, Inc. and the amount of identified assets acquired, and liabilities assumed, as of the agreement date: ​ ​ ​ ​ ​ Cash $ 1,000 Contingent consideration ​ 1,657 Total allocable purchase price ​ $ 2,657 ​ 10 ​ 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 was as follows: ​ ​ ​ ​ ​ Accounts receivable ​ $ 404 Intangible assets ​ 1,400 Contract liabilities ​ ( 1,362 ) Net assets acquired ​ $ 442 ​ ​ ​ ​ Goodwill ​ $ 2,215 ​ 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase Price Estimated ​ Allocation Useful Lives Amortizable intangible assets: ​ ​ ​ ​ ​ Trademark and trade name ​ $ 600 3 years Customer relationships ​ ​ 700 ​ 7 years Noncompete agreements ​ ​ 100 ​ 2 years Total intangible assets ​ $ 1,400 ​ ​ ​ Change 4 Growth Acquisition ​ On October 31, 2022, a subsidiary of the Company executed an Asset Purchase Agreement with Change 4 Growth, LLC (“Change 4 Growth”) and consummated the acquisition of substantially all the assets, and assumed certain liabilities, of Change 4 Growth. The purchase price was comprised of $ 3.8 million of cash consideration, $ 0.6 million of shares of ISG common stock issued promptly after closing and Change 4 Growth will also have the right to receive additional consideration paid via earn-out payments, if certain financial targets are met. At the agreement date, the Company estimated such earn-out payment would be $ 5.6 million. Please see Note 9—Commitments and Contingencies—Change 4 Growth Contingent Consideration for more. ​ The following table summarizes the consideration transferred to acquire Change 4 Growth and the amounts of identified assets acquired, and liabilities assumed, as of the agreement date: ​ ​ ​ ​ ​ Cash $ 3,450 Accrued working capital adjustment ​ ​ 378 ISG common stock ​ 600 Contingent consideration ​ 5,560 Total allocable purchase price ​ $ 9,988 ​ 11 ​ 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 the fair values as of the closing date. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets was as follows: ​ ​ ​ ​ ​ Accounts receivable and contract assets ​ $ 1,841 Intangible assets ​ 4,300 Accounts payable and accrued expense ​ ​ ( 428 ) Contract liabilities ​ ( 85 ) Net assets acquired ​ $ 5,628 ​ ​ ​ ​ Goodwill ​ $ 4,360 ​ 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. 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 Estimated ​ Allocation Useful Lives Amortizable intangible assets: ​ ​ ​ ​ ​ Trademark and trade name ​ $ 1,100 3 years Customer relationships ​ ​ 2,900 ​ 8 years Noncompete agreements ​ ​ 300 ​ 2 years Total intangible assets ​ $ 4,300 ​ ​ ​ ​ ​ 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. 12 ​ The following table summarizes the components of assets and liabilities held-for-sale on the Consolidated Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ ​ ​ ​ 2024 ​ Accounts receivable and contract assets, net of allowance ​ ​ 15,956 ​ Prepaid expenses and other current assets ​ ​ 105 ​ Assets held for sale- current assets ​ ​ 16,061 ​ Goodwill ​ ​ 9,727 ​ Intangible assets ​ ​ 6,448 ​ Deferred tax assets ​ ​ 37 ​ Assets held for sale non-current assets ​ ​ 16,212 ​ Total Assets held for sale ​ ​ 32,273 ​ ​ ​ ​ ​ ​ Accounts payable ​ ​ 1,168 ​ Contract liabilities ​ ​ 185 ​ Accrued expenses and other current liabilities ​ ​ 6,496 ​ Assets held for sale current liabilities ​ ​ 7,849 ​ Other liabilities ​ ​ 2,872 ​ Assets held for sale non-current liabilities ​ ​ 2,872 ​ Total Liabilities held for sale ​ ​ 10,721 ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ The majority of our revenue is derived from contracts that can span from a few months to several years. We enter into contracts that can include various combinations of services, which, depending on contract type, are sometimes capable of being distinct. If services are determined to be distinct, they are accounted for as separate performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation using our best estimate of the standalone selling price, or SSP, of each distinct product or service in the contract. We establish SSP based on management’s estimated selling price or observable prices of products or services sold separately in comparable circumstances to similar clients. Our contracts may include promises to transfer multiple services and products to a client. Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require judgment. 13 ​ Contract Balances The timing of revenue recognition, billings and cash collections result in billed accounts receivables, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities). Our clients are billed based on the type of arrangement. A portion of our services is billed monthly based on hourly or daily rates. There are also client engagements in which we bill a fixed amount for our services. This may be one single amount covering the whole engagement or several amounts for various phases, functions or milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits before revenue is recognized, resulting in contract liabilities. Contract assets and liabilities are generally reported in the current assets and current liabilities sections of the consolidated balance sheet, at the end of each reporting period, based on the timing of the satisfaction of the related performance obligation(s). For multi-year software sales with annual invoicing, we perform a significant financing component calculation and recognize the associated interest income throughout the duration of the financing period. In addition, we reclassify the resulting contract asset balances as current and noncurrent receivables as receipt of the consideration is conditional only on the passage of time and there are no performance risk factors present. See the table below for a breakdown of contract assets and contract liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2024 2023 Contract assets ​ $ 12,002 ​ $ 30,176 Contract liabilities ​ $ 9,880 ​ $ 9,521 ​ 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 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 ​ Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. 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 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. ​ 14 ​ The following table sets forth the computation of basic and diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ 2024 2023 2024 2023 Basic: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 1,148 ​ $ 3,201 ​ $ ( 203 ) ​ $ 9,025 ​ Weighted average common shares ​ 48,940 ​ 48,711 ​ 48,743 ​ 48,542 ​ Earnings (loss) per share ​ $ 0.02 ​ $ 0.07 ​ $ ( 0.00 ) ​ $ 0.19 ​ Diluted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 1,148 ​ $ 3,201 ​ $ ( 203 ) ​ $ 9,025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average common shares ​ 48,940 ​ 48,711 ​ 48,743 ​ 48,542 ​ Potential common shares ​ 1,218 ​ 1,546 ​ — ​ 1,745 ​ Diluted weighted average common shares ​ 50,158 ​ 50,257 ​ 48,743 ​ 50,287 ​ Diluted earnings (loss) per share ​ $ 0.02 ​ $ 0.06 ​ $ ( 0.00 ) ​ $ 0.18 ​ ​ ​ NOTE 8—INCOME TAXES ​ 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 September 30, 2024 and December 31, 2023. ​ Ventana Research Contingent Consideration ​ 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 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. ​ NOTE 10—SEGMENT AND GEOGRAPHICAL INFORMATION ​ The Company operates as one reportable segment consisting primarily of fact-based sourcing advisory services. The Company operates principally in the Americas, Europe and Asia Pacific. ​ 15 ​ Geographical revenue information for the segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2024 2023 2024 2023 Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas ​ $ 40,146 ​ $ 42,469 ​ $ 120,967 ​ $ 133,149 Europe ​ 16,199 ​ 22,090 ​ 52,796 ​ 69,496 Asia Pacific ​ 4,932 ​ 7,214 ​ 16,045 ​ 22,223 ​ ​ $ 61,277 ​ $ 71,773 ​ $ 189,808 ​ $ 224,868 ​ The segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating income by geography or by service line for the purposes of making operating decisions or allocating resources. ​ NOTE 11—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 (as further amended, the “2023 Credit Agreement”). The material terms under the 2023 Credit Agreement are as follows. 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. ● 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, 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 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. In addition, the Company is required to comply with a consolidated leverage ratio and consolidated interest 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. 16 ​ 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 $ 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 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. 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 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. All future dividends will be subject to the Board’s approval. ​