Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast” and similar expressions (or the negative of such expressions). Forward-looking statements include, but are not limited to, statements concerning 2024 revenue growth rates and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price, current competitive conditions and the impact of wars, such as the war in Ukraine and the conflict in the Middle East. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that the Company faces, see the discussion in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 titled “Risk Factors” and in this Quarterly Report on Form 10-Q under Item 1A of Part II, “Risk Factors.”
BUSINESS OVERVIEW
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 over 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. Founded in 2006, and based in Stamford, Connecticut, ISG employs approximately 1,500 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking,
17
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 information on or accessible through our website is not part of and is not incorporated by reference into this Quarterly Report on Form 10-Q, and the inclusion of our website address in this Quarterly Report on Form 10-Q is only for reference.
Our strategy is to strengthen our existing market position and develop new services and products to support future growth plans. As a result, we are focused on growing our existing service model, expanding geographically, developing new industry sectors, productizing market data assets, expanding our managed services offerings and growing via acquisitions. Although we do not expect any adverse conditions that will impact our ability to execute against our strategy over the next twelve months, the more significant factors that could limit our ability to grow in these areas include global macro-economic conditions and their impact on the overall sourcing market, competition, our ability to retain advisors and reductions in discretionary spending with our top client accounts or other significant client events. Other areas that could impact the business would also include natural disasters, pandemics, wars, legislative and regulatory changes and capital market disruptions.
We principally derive revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for revenue recognition.
Revenues for time and materials contracts are recognized based on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project.
We also derive our revenues from certain recurring revenue streams. These include such annuity-based ISG offerings as ISG GovernX, Research, Software as a Subscription (Automation licenses), ISG Inform and multi-year Public Sector contracts. These offerings are characterized by subscriptions (i.e., renewal-centric as opposed to project-centric revenue streams) or, in some instances, multi-year contracts. Our digital services now span a volume of offerings and have become embedded as part of our traditional transaction services. Digital enablement provides capabilities, digital insights and better engagement with clients and partners.
Our results are impacted principally by our full-time consultants’ utilization rate, the number of business days in each quarter and the number of our revenue-generating professionals who are available to work. Our utilization rate can be negatively affected by increased hiring because there is generally a transition period for new professionals that result in a temporary drop in our utilization rate. Our utilization rate can also be affected by seasonal variations in the demand for our services from our clients. The number of business workdays is also affected by the number of vacation days taken by our consultants and holidays in each quarter. We typically have fewer business workdays available in the fourth quarter of the year, which can impact revenues during that period. Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. The volume of work performed for any particular client can vary widely from period to period.
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023
Revenues
Geographical revenue information for the segment is as follows:
Three Months Ended September 30,
Percent
Geographic Area
2024
2023
Change
Change
($ in thousands)
Americas
$
40,146
$
42,469
$
(2,323)
(5)
%
Europe
16,199
22,090
(5,891)
(27)
%
Asia Pacific
4,932
7,214
(2,282)
(32)
%
Total revenues
$
61,277
$
71,773
$
(10,496)
(15)
%
Revenues decreased $10.5 million, or approximately 15%, in the third quarter of 2024. The decrease in revenue for the Americas was primarily attributable to a decrease in our Automation and Network & Software Advisory Service (“NaSa”) service lines, partially offset by an increase in our Research service line. The decrease in revenue in Europe was primarily attributable to a decrease in our Advisory and Automation service lines. The revenue decrease in Asia Pacific was primarily attributable to a decrease in our Advisory service line. The translation of foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $0.3 million.
Operating Expenses
The following table presents a breakdown of our operating expenses by category:
Three Months Ended September 30,
Percent
Operating Expenses
2024
2023
Change
Change
($ in thousands)
Direct costs and expenses for advisors
$
36,530
$
43,032
$
(6,502)
(15)
%
Selling, general and administrative
18,855
20,992
(2,137)
(10)
%
Depreciation and amortization
1,598
1,526
72
5
%
Total operating expenses
$
56,983
$
65,550
$
(8,567)
(13)
%
Total operating expenses decreased $8.6 million, or approximately 13%, for the third quarter of 2024. The decrease in operating expenses was primarily due to lower contract labor expense of $3.3 million, contingent consideration adjustment of $2.4 million, license fees of $2.3 million and compensation expense of $1.6 million. These costs were partially offset by higher bad debt expense of $0.6 million, acquisition costs of $0.6 million and stock-based compensation expense of $0.2 million.
Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and profit-sharing plan contributions. A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities. Bonus compensation is determined based on achievement against Company financial targets and is accrued monthly throughout the year based on management’s estimates of target achievement. Statutory and elective profit-sharing plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers’ compensation and disability insurance.
Sales and marketing costs consist principally of compensation expenses related to business development, proposal preparation and delivery and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and business intelligence activities. The Company maintains a
19
dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the ISG Index and assembling proposals.
We maintain a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and development of project management skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary methodologies and tools and the systems that support them.
Selling, general and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to general management activities, IT infrastructure and costs for finance, accounting, information technology and human resource functions. General and administrative costs also reflect continued investment associated with implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises or work remotely, all occupancy expenses are recorded as general and administrative.
Depreciation and amortization expense was $1.6 million and $1.5 million for the third quarters of 2024 and 2023, respectively. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.
We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions is not amortized, but is subject to annual impairment testing and interim impairment tests, if triggering events are identified.
Other Income (Expense), Net
The following table presents a breakdown of other income (expense), net:
Three Months Ended September 30,
Percent
Other income (expense), net
2024
2023
Change
Change
(in thousands)
Interest income
$
222
$
104
$
118
113
%
Interest expense
(1,604)
(1,533)
(71)
(5)
%
Foreign currency transaction gain
(30)
(2)
(28)
(1,400)
%
Total other expense, net
$
(1,412)
$
(1,431)
$
19
1
%
The total decrease in other expenses of approximately 1% was primarily the result of higher interest income, offset by higher interest expense attributable to higher interest rates.
Income Tax Expense
Our quarterly effective tax rate varies from period to period based on the mix of our earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the quarter ended September 30, 2024 was 60.2% compared to 33.2% for the quarter ended September 30, 2023. The difference for the quarter ended September 30, 2024 was primarily due to the impact of earnings and losses in certain foreign jurisdictions. The Company’s effective tax rate for the quarter ended September 30, 2024 was larger than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves or valuation allowances during the quarter ended September 30, 2024.
20
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023
Revenues
Geographical revenue information for the segment is as follows:
Nine Months Ended September 30,
Percent
Geographic Area
2024
2023
Change
Change
(in thousands)
Americas
$
120,967
$
133,149
$
(12,182)
(9)
%
Europe
52,796
69,496
(16,700)
(24)
%
Asia Pacific
16,045
22,223
(6,178)
(28)
%
Total revenues
$
189,808
$
224,868
$
(35,060)
(16)
%
Revenues decreased $35.1 million, or approximately 16%, for the nine months ended September 30, 2024. The decrease in revenue in the Americas was primarily attributable to a decrease in our Advisory and NaSa service lines, partially offset by an increase in our Research service line. The decrease in revenue in Europe was primarily attributable to a decrease in our Advisory and Automation service lines partially offset by an increase in our NaSa service line. The decrease in revenue in Asia Pacific was primarily attributable to a decrease in our Advisory service line. The translation of foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $0.4 million.
Operating Expenses
The following table presents a breakdown of our operating expenses by category:
Nine Months Ended September 30,
Percent
Operating Expenses
2024
2023
Change
Change
(in thousands)
Direct costs and expenses for advisors
$
116,484
$
138,048
$
(21,564)
(16)
%
Selling, general and administrative
63,026
63,992
(966)
(2)
%
Depreciation and amortization
4,724
4,692
32
1
%
Total operating expenses
$
184,234
$
206,732
$
(22,498)
(11)
%
Total operating expenses decreased $22.5 million, or approximately 11%, for the nine months ended September 30, 2024. The decrease in operating expenses was primarily due to lower contract labor expense of $12.9 million, compensation expense of $6.9 million, license fees of $2.8 million, contingent consideration adjustment of $2.4 million, stock-based compensation expense of $1.1 million and professional fees of $0.5 million. These costs were partially offset by higher severance and integration expenses of $2.2 million, bad debt expense of $0.7 million and acquisition costs of $0.6 million.
Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and profit-sharing plan contributions. A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities. Bonus compensation is determined based on achievement against Company financial and individual targets and is accrued monthly throughout the year based on management’s estimates of target achievement. Statutory and elective profit-sharing plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers’ compensation and disability insurance.
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Sales and marketing costs consist principally of compensation expense related to business development, proposal preparation and delivery and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and business intelligence activities. The Company maintains a dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the ISG Index and assembling proposals.
We maintain a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and development of project management skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary methodologies and tools and the systems that support them.
General and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to general management activities, IT infrastructure and costs for finance, accounting, information technology and human resource functions. General and administrative costs also reflect continued investment associated with implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises or work remotely, all occupancy expenses are recorded as general and administrative.
Depreciation and amortization expense was $4.7 million for the nine months ended September 30, 2024 and 2023, respectively. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.
We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions is not amortized but is subject to annual impairment testing and interim impairment tests, if triggering events are identified.
Other Income (Expense), Net
The following table presents a breakdown of other income (expense), net:
Nine Months Ended September 30,
Percent
Other income (expense), net
2024
2023
Change
Change
(in thousands)
Interest income
$
701
$
285
$
416
146
%
Interest expense
(4,672)
(4,676)
4
0
%
Foreign currency transaction gain (loss)
(24)
(40)
16
40
%
Total other income (expense), net
$
(3,995)
$
(4,431)
$
436
10
%
The total decrease in other expenses of $0.4 million was primarily the result of higher interest income.
Income Tax Expense
Our quarterly effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the nine months ended September 30, 2024 was 112.9% compared to 34.1% for the nine months ended September 30, 2023. The difference for the nine months ended September 30, 2024 was primarily due to the impact of earnings and losses in certain foreign jurisdictions. The Company’s effective tax rate for the nine months ended September 30, 2024 was larger than the statutory rate primarily due to non-deductible expenses and the impact of foreign operations. There were no significant changes in uncertain tax position reserves or valuation allowances during the nine months ended September 30, 2024.
22
NON-GAAP FINANCIAL PRESENTATION
This management’s discussion and analysis presents supplemental measures of our performance that are derived from our consolidated financial information but are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We refer to these financial measures, which are considered “non-GAAP financial measures” under rules promulgated by the Securities and Exchange Commission, as adjusted EBITDA, adjusted net income and adjusted net income per diluted share, each as defined below. See “Non-GAAP Financial Measures” below for information about our use of these non-GAAP financial measures, including our reasons for including these measures and reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure.
NON-GAAP FINANCIAL MEASURES
We use non-GAAP financial measures to supplement the financial information presented on a GAAP basis. We provide adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, change in contingent consideration, acquisition-related costs, and severance, integration and other expense), adjusted net income (defined as net income, plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, change in contingent consideration, acquisition-related costs, severance, integration and other expense and write-off of deferred financing costs, on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net tax effect of the items set forth in the table below. These are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations that management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by the Company to evaluate the Company’s business strategies and management’s performance. However, they are not measurements of financial performance under GAAP and should not be considered as alternatives to measures of performance derived in accordance with GAAP. These non-GAAP financial measures exclude non-cash and certain other special charges that many investors believe may obscure the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. We believe that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
($ in thousands)
Net income (loss)
$
1,148
$
3,201
$
(203)
$
9,025
Plus:
Interest expense (net of interest income)
1,382
1,429
3,971
4,391
Income taxes
1,734
1,591
1,782
4,680
Depreciation and amortization
1,598
1,526
4,724
4,692
Interest accretion associated with contingent consideration
7
26
66
77
Change in contingent consideration (Note 3)
(2,390)
—
(2,390)
—
Acquisition-related costs (1)
654
99
679
99
Severance, integration and other expense
586
674
4,263
2,016
Foreign currency transaction loss
30
2
24
40
Non-cash stock compensation
2,329
2,098
5,690
6,752
Adjusted EBITDA
$
7,078
$
10,646
$
18,606
$
31,772
23
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
($ in thousands)
Net income (loss)
$
1,148
$
3,201
$
(203)
$
9,025
Plus:
Non-cash stock compensation
2,329
2,098
5,690
6,752
Intangible amortization
738
769
2,230
2,352
Interest accretion associated with contingent consideration
7
26
66
77
Change in contingent consideration (Note 3)
(2,390)
—
(2,390)
—
Acquisition-related costs (1)
654
99
679
99
Severance, integration and other expense
586
674
4,263
2,016
Write-off of deferred financing costs
—
—
—
379
Foreign currency transaction loss
30
2
24
40
Tax effect (2)
(625)
(1,174)
(3,380)
(3,749)
Adjusted net income
$
2,477
$
5,695
$
6,979
$
16,991
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Net income (loss) per diluted share
$
0.02
$
0.06
$
(0.00)
$
0.18
Non-cash stock compensation
0.05
0.04
0.12
0.13
Intangible amortization
0.02
0.02
0.04
0.05
Interest accretion associated with contingent consideration
0.00
0.00
0.00
0.00
Change in contingent consideration (Note 3)
(0.05)
—
(0.05)
—
Acquisition-related costs (1)
0.01
0.00
0.01
0.00
Severance, integration and other expense
0.01
0.01
0.09
0.04
Write-off of deferred financing costs
—
—
—
0.01
Foreign currency transaction loss
0.00
(0.00)
0.00
0.00
Tax effect (2)
(0.01)
(0.02)
(0.07)
(0.07)
Adjusted net income per diluted share
$
0.05
$
0.11
$
0.14
$
0.34
(1) Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.
(2) Marginal tax rate of 32%, reflecting U.S. federal income tax rate of 21% plus 11% attributable to U.S. states and foreign jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our primary sources of liquidity are cash flows from operations, existing cash and cash equivalents and our revolving credit facility. Operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable, accrued expenses and accrued payroll and related benefits. The volume of billings and timing of collections and payments affect these account balances.
As of September 30, 2024, our cash, cash equivalents and restricted cash were $9.8 million compared to $22.8 million as of December 31, 2023, a net decrease of $13.0 million, which was primarily attributable to the following:
● net cash provided by operating activities of $13.3 million;
● repayment of outstanding debt of $23.0 million;
● proceeds from revolving facility of $10.0 million;
24
● cash dividends paid to shareholders of $4.9 million;
● purchase of furniture, fixtures and equipment of $2.3 million;
● treasury shares repurchased of $3.4 million;
● payment of contingent consideration earnout payment of $1.7 million;
● payments related to tax withholding for stock-based compensation of $1.9 million; and
● proceeds from issuance of employee stock purchase plan shares of $0.6 million.
Capital Resources
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.
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
25
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.
We anticipate that our current cash and the ongoing cash flows from our operations will be adequate to meet our working capital, capital expenditure and debt financing needs for at least the next twelve months. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business. If we require additional capital resources to grow our business, either internally or through acquisitions, or to maintain liquidity, we may seek to sell additional equity securities or to secure additional debt financing. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future.
Dividend Program
On November 1, 2024, the Company’s Board of Directors (the “Board”) approved a fourth-quarter dividend of $0.045 per share, payable on 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.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.
Recently Issued Accounting Pronouncements
See Note 3 to our condensed consolidated financial statements included elsewhere in this report.
26
Critical Accounting Policies and Accounting Estimates
This management’s discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements. We prepare these financial statements in conformity with GAAP. As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
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