What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-13 compared with 2024-03-08 · 113 added, 95 removed, 212 unchanged (50% of the section changed)

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Historical results and percentage relationships are not necessarily indicative of operating results for future periods.

References to “we,” “our” and “us” in this MD&A are to the Company and its consolidated subsidiaries.

This MD&A provides an analysis of our consolidated financial results and cash flows for 2023 and 2022 under the headings “Results of Operations,” “Non-GAAP Financial Presentation,” “Non-GAAP Financial Measures,” and “Liquidity and Capital Resources.” For a similar detailed discussion comparing 2022 and 2021, refer to those headings under Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2022.

References to “ISG”, “we,” “our” and “us” in this MD&A are to the Company and its consolidated subsidiaries.

This MD&A provides an analysis of our consolidated financial results and cash flows for 2024 and 2023 under the headings “Results of Operations,” “Non-GAAP Financial Presentation,” “Non-GAAP Financial Measures,” and “Liquidity and Capital Resources.” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2023.

BUSINESS OVERVIEW

Information Services Group, Inc.

III) 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 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.

III) is a global Artificial AI-centered technology research and advisory firm.

A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services sourcing that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth.

The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,300 professionals worldwide working together to help clients maximize the value of their technology investments.

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 Annual Report on Form 10 K or any other filings.

Our strategy is to strengthen our existing market position and develop new services and products to support future growth plans.

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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.

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.

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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 the multi-year Public Sector contracts.

These include such annuity-based ISG offerings as ISG GovernX, ISG Research Lens.

ISG Inform and the 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.

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CURRENT ENVIRONMENT

Inflation rates and the adverse effect of interest rates have increased significantly in the past year.

Inflation rates and the adverse effect of interest rates have been volatile in the past year.

Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy.

Our exposure from changes to interest rates has impacted our business operations, financial performance and results of operations, as our interest expense has increased from $3.2 million in 2022 to $6.2 million in 2023.

Changes to interest rates has impacted our business operations, financial performance and results of operations, as our interest expense has decreased from $6.2 million in 2023 to $5.8 million in 2024.

The Company continuously monitors these changes and evaluates any effect.

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EXECUTIVE SUMMARY

2023 was a largely successful year for ISG.

We delivered another year of record revenues, at $291 million.

A strong first nine months of the year was followed by a soft fourth quarter, due to lingering macro concerns that impacted demand for advisory services in the short term.

Given that the overall IT and business services industry was down 6 percent for the year, we consider our topline growth of 2 percent to be a solid performance.

Our investments in our recurring-revenue businesses continue to pay off.

For the year, we generated record recurring revenues of $125 million, up 16 percent, driven by our research and platforms businesses.

Recurring revenue now represents 43 percent of our overall revenue, up 500 basis points from the prior year.

This puts us on track to reach our previously announced target of $150 million in recurring revenues by the end of 2025.

Our profitability, as measured by adjusted EBITDA, was $38 million, down from the prior year.

Even as discretionary spending on advisory services slowed in toward the end of the year, we decided to retain much of our advisory team globally in anticipation of a rebound in 2024, while investing in training more than 1,200 of our employees in AI technology during the fourth quarter.

We continue to expand our business for current and future growth—organically in areas like Cybersecurity, Training-as-a-Service (TaaS), and most recently Enterprise AI Advisory—and through acquisition, with our October purchase of Ventana Research.

A leading technology research business covering the $800 billion global software industry, Ventana Research gives us unmatched analyst coverage of software vendors—adding an important new pillar to our ISG Research portfolio and a strong complement to our Software Advisory business.

With this addition, ISG is increasing its recurring revenue streams, while gaining more than 40 unique new clients and adding nearly two dozen talented research professionals to our roster of world-class technology analysts.

Our acquisition of Ventana Research came one year to the day after we acquired Change 4 Growth, a leading change management firm, in 2022.

C4G has proven to be an excellent complement to our existing Enterprise Change business, delivering double-digit growth in 2023.

ISG influences more than $200 billion in enterprise technology spending annually.

We are using this market influence to lay the groundwork for the next big thing in technology:

Artificial Intelligence, especially the most-talked-about technology development of our time—Generative AI.

Through our new Enterprise AI Advisory business, we are identifying use cases for this exciting new technology and demonstrating where the greatest opportunities lie for ROI.

That includes advising clients on performance improvements in their IT operations and business processes and how to design for, buy, build, run and govern AI products, infrastructure and services.

Beyond AI, we are leveraging our global leadership in sourcing advisory to launch a platform solution called ISG Tango™ that puts our sourcing playbooks and intellectual property, contract exhibits, provider intelligence and other tools at the fingertips of our enterprise and provider clients and our advisors, to make the overall sourcing process more efficient and interactive.

ISG Tango™, we believe, will enable us to capture more unadvised transaction activity among the world’s largest enterprises (the G2000), and penetrate the underserved middle market, which spends an estimated $130 billion annually on technology and business services.

2024 was a challenging year for our industry and our firm.

Enterprises were cautious in the face of challenging global economic and geopolitical conditions, pulling back on discretionary technology spending.

This impacted the entire technology services industry.

But the clouds of client caution are beginning to lift, and we are starting to see signs client spending is on the rise, beginning in the U.S., in the early months of 2025.

In particular, we are seeing a resurgence in cloud transformations, as clients push even more infrastructure and applications to the cloud.

The cloud offers both operating efficiencies and the scalability needed to power large language models and AI-driven applications.

ISG has been investing in AI for more than two years now.

In that time, we’ve been making AI investments in our people, platforms and products, to better serve our clients and help them harness the power of AI to achieve operational excellence and faster growth.

In February 2025, we announced a strategic repositioning of our firm, reflecting the expanding role ISG has been playing in helping our clients adopt AI at scale.

We are now positioned as a “global AI-centered technology research and advisory firm.”

AI is at the heart of everything we do—from the technology strategies we develop and the partners we recommend to our clients, to the impact of AI on the future of work.

We have truly become an AI-centered firm.

During 2024, our two biggest innovations were the launch of our Enterprise AI Advisory business in January and the introduction of our AI-enabled sourcing platform, ISG Tango™, in March.

Born out of our first-mover research on the state of the AI services market in 2023, Enterprise AI is really an extension of our existing capabilities, leveraging our market influence and permission as the world’s leading sourcing and governance advisor to help clients navigate the complexities and implications of adopting this game-changing technology at scale.

ISG has worked with more than 100 clients this past year to set AI strategy, create AI-ready infrastructure and data, build AI provider ecosystems, and establish AI governance frameworks.

Our ISG Research business, meanwhile, has produced detailed AI market surveys and analysis covering both the service and software provider ecosystems.

AI is also playing a role in modernizing our approach to sourcing advisory, through our groundbreaking ISG Tango sourcing platform.

With ISG Tango, we have digitized elements of our market-leading sourcing transactions business to better serve clients and improve transaction speed and efficiency.

The platform draws on our unmatched data assets, intellectual property and proprietary tools, powered by AI to automate contracting and provide real-time predictive insights that streamline the transaction process and accelerate time to agreement.

In 2024, we were awarded a second U.S.

patent for our proprietary AI-powered contracting technology, and we have a third patent pending for a next-level solution.

These patented capabilities are offered as part of our GovernX vendor compliance and risk management platform.

To sharpen our focus on our core strengths, in early October we sold our automation unit to UST for more than $20 million in cash, a move that significantly improved our balance sheet.

We decided to sell the business because its growing reliance on software license sales for robotic process automation was at odds with our position as an independent, third-party advisory firm.

With our stronger cash position, we reduced our debt by $7 million in the fourth quarter, and by $20 million, or 25 percent, for the year.

We also paid dividends of $9.4 million and repurchased $7.7 million of ISG shares during the year.

On an operating basis, ISG delivered revenues of $248 million, down 15 percent, due to a sluggish first half of the year.

We saw an uptick in client demand in the back half of the year.

Our more predictable recurring revenue streams, meanwhile, continue to grow as a percentage of our total revenues.

For the full year, recurring revenues were $118 million dollars, or 48 percent of firm revenues.

Our recurring revenues were powered by growth in our ISG Research business, with its expanded portfolio of software and technology research;

in our ISG GovernX® vendor compliance and risk management business, as we added new capabilities and clients, and in our U.S.

Public Sector business, as more state and local government entities turn to us to support their technology modernization initiatives through long-term contracts.

Adjusted EBITDA, though down from the prior year on lower revenues, also began to rebound in the fourth quarter, up 11 percent, with our adjusted EBITDA margin up 200 basis points.

This was due to our disciplined operating approach, our higher utilization in the fourth quarter – up more than 700 basis points year over year – and our improved business mix.

RESULTS OF OPERATIONS

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Total revenues

Revenues increased by $4.8 million or approximately 2% in 2023.

The increase in revenue in the Americas was primarily attributable to an increase in our Consulting and Automation service lines.

The slight decrease in revenue in Europe was primarily attributable to a decrease in our Advisory service line, partially offset by an increase in our Automation and Research service lines.

The decrease in revenue in Asia Pacific was primarily attributable to a decrease in our Advisory and NaSa service lines, partially offset by an increase in our Research service line.

Revenues decreased by $43.5 million or approximately 15% in 2024.

The decrease in revenue in the Americas was primarily attributable to a decrease in our Advisory, Network & Software Advisory Services (“NaSa”) and Automation service lines, partially offset by an increase in Research service line.

The decrease in revenue in Europe was primarily attributable to a decrease in our Advisory and Automation service lines.

The decrease in revenue in Asia Pacific was primarily attributable to a decrease in our Advisory service line.

The sale of Automation service line also attributed to the decrease in revenue in the Americas and Europe.

The translation of foreign currency revenues into U.S.

dollars was flat with a negative impact in Asia Pacific, being offset by a positive impact in Europe compared to the prior year.

dollars had a positive impact in Europe and Asia Pacific compared to the prior year by $0.7 million.

Operating Expenses

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Total operating expenses

Total operating expenses increased by $19.7 million, or approximately 8%, in 2023.

The increase in operating expenses was due primarily to higher bad debt expense of $5.1 million (refer to Note 2 for details), license fees of $5.0 million, contract labor of $3.0 million, restructuring costs of $1.9 million, travel and entertainment expenses of $1.7 million, non-cash stock based compensation of $1.7 million, computer expenses of $1.0 million, professional fees of $0.7 million and conference expenses of $0.5 million.

The cost increases were partially offset by lower compensation expenses of $2.4 million.

Total operating expenses decreased by $34.6 million, or approximately 13%, in 2024.

The decrease in operating expenses was due primarily to lower contract labor of $13.7 million, compensation expenses of $10.5 million, license fees of $5.7 million, contingent consideration adjustment of $2.5 million, restructuring costs of $2.4 million, non-cash stock-based compensation of $1.1 million, professional fees of $0.7 million and travel and entertainment expenses of $0.6 million.

These costs were partially offset by higher acquisition- and disposition-related cost of $2.7 million and bad debt expense of $0.6 million.

Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and retirement plan contributions.

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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.

Selling costs consist principally of compensation expense related to business development, proposal preparation and delivery and negotiation of new client contracts.

Selling costs consist principally of compensation expense related to business development, proposal preparation, acquisition and disposition-related cost and delivery and negotiation of new client contracts.

Selling 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.

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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.

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 remotely or on client premises, all occupancy expenses are recorded as general and administrative.

Depreciation and amortization expenses in 2023 and 2022 were $6.3 million and $5.4 million, respectively.

The increase of $0.9 million was primarily due to the acquisitions of Change 4 Growth and Ventana Research.

See Note 4—Acquisition in the Notes to Consolidated Financial Statements for more regarding these acquisitions.

Depreciation and amortization expenses amounted to $5.9 million in 2024 and $6.3 million in 2023, respectively.

The decrease of $0.4 million was primarily due to the sale of the automation business in 2024.

Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements.

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Interest expense

Gain on the sale of business

Foreign currency transaction gain

Total other expense, net

The total increase of $3.1 million was primarily the result of higher interest expense attributable to higher interest rates, our higher debt balance and $0.4 million associated with the write-off of deferred financing costs.

The total decrease of $5.3 million was primarily attributable to gain on the sale of business of $4.5 million that is related to the sale of the automation business.

Income Tax Expense

Our effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax jurisdictions in which business is conducted and the level of non‑deductible expenses incurred in any given period.

Our 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 incurred in any given period.

Our effective tax rate for the year ended December 31, 2024 was 45.7% compared to 29.8% for the year ended December 31, 2023.

The variance from the U.S.

statutory rate of 21.0% for the year ended December 31, 2023 was primarily caused by the impact of higher tax rates applicable on company earnings in foreign jurisdictions and non-deductible expenses for tax purposes in the United States.

statutory rate of 21.0% for the year ended December 31, 2024, was primarily caused by state taxes, the impact of higher tax rates applicable on company earnings in foreign jurisdictions, non-deductible expenses for tax purposes in the United States, and a benefit from the sale of the automation business.

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”).

This MD&A 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 SEC rules, as adjusted EBITDA, adjusted net income and adjusted earnings 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.

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, tax indemnity receivables, accounts receivables reserve, 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, acquisition-related costs, accounts receivables reserves, write-off of deferred financing cost and severance, integration and other expense on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net of 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.

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.

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, tax indemnity receivables, accounts receivables reserve, acquisition and disposition-related costs, gain/loss on sale of business 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, acquisition and disposition-related costs, accounts receivable reserves, write-off of deferred financing cost and severance, integration, gain/loss sales of business and other expense on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net of 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 and exclude non-cash and certain other special charges that some investors may believe 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 financial 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.

Years Ended December 31,

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Depreciation and amortization

Gain on sale of business

Interest accretion associated with contingent consideration

Acquisition-related costs (1)

Change in contingent consideration (Note 2)

Acquisition and disposition-related costs (1)

Severance, integration and other expense

Account Receivables Reserves

Accounts receivable reserves (3)

Tax indemnity receivables

Foreign currency transaction loss (gain)

Foreign currency transaction loss

Non-cash stock compensation

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Interest accretion associated with contingent consideration

Acquisition-related costs (1)

Account Receivables Reserves

Change in contingent consideration (Note 2)

Acquisition and disposition-related costs (1)

Accounts receivable reserves (3)

Gain on sale of business

Severance, integration and other expense

Write-off of deferred financing costs

Foreign currency transaction loss (gain)

Foreign currency transaction loss

Tax effect (2)

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Interest accretion associated with contingent consideration

Acquisition-related costs (1)

Account Receivables Reserves

Change in contingent consideration (Note 2)

Acquisition and disposition-related costs (1)

Accounts receivable reserves (3)

Gain on sale of business

Severance, integration and other expense

Write-off of deferred financing costs

Foreign currency transaction loss (gain)

Foreign currency transaction loss

Tax effect (2)

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________________________________________

Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.

Consists of expenses from acquisition and disposition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.

Marginal tax rate of 32%, reflecting U.S.

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states and foreign jurisdictions.

Adjustment relates to a specific reserve of $4.8 million related to one client with whom we ceased performing services during the fourth quarter of 2023, following the client’s failure to make payments as per the contracted payment schedule.

Refer to Note 2 of the consolidated financial statements for further detail.

LIQUIDITY AND CAPITAL RESOURCES

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Effect of exchange rate changes on cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

As of December 31, 2023, our liquidity and capital resources included cash, cash equivalents and restricted cash of $22.8 million compared to $30.7 million as of December 31, 2022, a net decrease of $7.9 million, which was primarily attributable to the following:

Net increase (decrease) in cash, cash equivalents, and restricted cash

As of December 31, 2024, our liquidity and capital resources included cash, cash equivalents and restricted cash of $23.2 million compared to $22.8 million as of December 31, 2023, a net increase of $0.4 million, which was primarily attributable to the following:

● our operating activities provided net cash of $19.9 million for the year ended December 31, 2024.

Net cash provided from operations was primarily attributable to our net income after adjustments for non-cash charges of approximately $25.5 million partially offset by $13.2 million use of working capital primarily attributable to a $6.7 million change in accounts receivables and contract assets, a $6.5 million change in prepaid expense and other assets, a $4.9 million change in accounts payables, partially offset by a $3.8 million change in accrued expenses and other liabilities;

and $1.1 million change in contract liabilities;

Net cash provided from operations was primarily attributable to our net income after adjustments for non-cash charges of approximately $10.0 million and $9.9 million provided from working capital primarily attributable to $7.1 million change in account receivables, a change in prepaid expenses and other assets of $5.0 million, $0.7 million change in contract liabilities, partially offset by a $1.6 million change in accounts payable and a $1.4 million change in accrued expenses and other liabilities;

● treasury share repurchases of $5.6 million;

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● payment of contingent consideration of $1.7 million;

● payment for Ventana acquisition of $1.0 million:

● payments related to debt financing costs of $0.8 million;

● proceed from the sale of automation business of $21.8 million:

● capital expenditures for property, plant and equipment of $2.8 million;

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The Company’s current outstanding debt may limit our ability to fund general corporate requirements and obtain additional financing, impact our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic and industry conditions.

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

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 on June 27, 2024, the “2023 Credit Agreement”).

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

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● 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.

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

● The senior secured credit facility contains customary events of default, including cross-default to other material agreements, judgment default and change of control provisions.

The Company’s financial statements include outstanding borrowings of $59.2 million as of December 31, 2024 and $79.2 million as of December 31, 2023, 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 is approximately $79.8 million and $76.5 million as of December 31, 2023 and December 31, 2022, respectively.

The fair value of the Company’s outstanding borrowings was approximately $59.6 million and $79.8 million as of December 31, 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 6.4% and 6.9% for December 31, 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.

In the third quarter of 2023, the Company borrowed $5.0 million against the revolver and subsequently repaid $5.0 million during that quarter.

The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and

interest rates.

In 2024, the Company borrowed $28.0 million and subsequent repaid $48.0 million of its revolving credit facility.

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.

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 acquisition, or maintain liquidity, we may seek to sell additional equity securities or to secure additional debt financing.

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Since future events and their impact cannot be determined with certainty, the actual results may differ from estimates.

Such differences may be material to the consolidated financial statements.

We believe the application of accounting policies, and the estimates inherently required therein, are reasonable.

Such differences may be material to out consolidated financial statements.

We believe the application of our accounting policies, and the estimates inherently required therein, are reasonable.

These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change.

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Revenue for these contracts is recognized proportionally over the term of the contract using an input method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed-fee contract performance obligations, which we consider the best available indicator of the pattern and timing in which contract performance obligations are fulfilled and control transfers to the customer.

This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period.

This percentage is multiplied by the contracted dollar amount of the project to determine the amount

of revenue to recognize in an accounting period.

The contracted amount used in this calculation typically excludes the amount the client pays for reimbursable expenses.

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These contracts can be fixed in fees or can be based on the level of savings achieved related to its communications costs.

Additionally, these contracts can also have a fixed component and a contingent component that is based on the savings generated by the Company.

Additionally, these contracts can also have a fixed component and a contingent component based on the savings generated by the Company.

For network and software contingency contracts with termination for convenience clauses, revenue is recognized over time due to the existence of provisions for payment for progress incurred to date plus a reasonable profit margin.

The contract periods range from a few months to in excess of a year.

We also enter into arrangements for the sale of automation software licenses and related delivery of consulting or implementation services at the same time or within close proximity to one another.

Such software-related performance obligations include the sale of on-premise software, hybrid and software-as-a-service licenses, as well as other software-related services.

We also previously entered into arrangements for the sale of automation software licenses and related delivery of consulting or implementation services at the same time or within close proximity to one another.

Such software-related performance obligations included the sale of on-premises software, hybrid and software-as-a-service licenses, as well as other software-related services.

Revenue associated with the software performance obligation is primarily recognized at the point at which the software is installed, or access is granted.

We sold our automation business line in Q4 2024.

Revenue associated with events is recognized at the point of time at which the event occurs and is primarily comprised of sponsorships.

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Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements included elsewhere in this report.

See Note 2 to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

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-K

Item 7. Management’s Discussion and Analysis