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 2025 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 U.S. tariffs, trade barriers and restrictions, as well as wars. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that we face, see the discussion in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 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 global 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 Quarterly Report on Form 10-Q or any other filings.
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 the 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, ISG Research Lens, ISG Inform and our 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.
16
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. 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.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND JUNE 30, 2024
Revenues
The following table presents a breakdown of our revenue by geographic area:
Three Months Ended June 30,
Percent
Geographic Area
2025
2024
Change
Change
($ in thousands)
Americas
$
39,480
$
39,981
$
(501)
(1)
%
Europe
16,637
18,801
(2,164)
(12)
%
Asia Pacific
5,448
5,481
(33)
(1)
%
Total revenues
$
61,565
$
64,263
$
(2,698)
(4)
%
Revenues decreased $2.7 million, or approximately 4%, in the second quarter of 2025 compared to the second quarter of 2024. The decrease in revenue in the Americas was primarily due to a decrease in Automation revenue (excluding the prior year Automation revenue due to sale of the Automation service line, revenues would have reported an increase of 16%), partially offset by an increase in Consulting service lines. The decrease in revenue in Europe was primarily attributable to a decrease in Automation and Network & Software Advisory Services (“NaSa”) service lines (excluding the prior year Automation revenue, revenues would have reported a decrease of 7%). The revenue decrease in Asia Pacific was primarily attributable to a decrease in our Consulting and NaSa service lines. The translation of foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $0.9 million.
Operating Expenses
The following table presents a breakdown of our operating expenses by category:
Three Months Ended June 30,
Percent
Operating Expenses
2025
2024
Change
Change
($ in thousands)
Direct costs and expenses for advisors
$
35,591
$
38,908
$
(3,317)
(9)
%
Selling, general and administrative
20,144
20,083
61
0
%
Depreciation and amortization
1,165
1,622
(457)
(28)
%
Total operating expenses
$
56,900
$
60,613
$
(3,713)
(6)
%
Total operating expenses decreased $3.7 million, or approximately 6%, for the second quarter of 2025 compared to the second quarter of 2024. The decrease in operating expenses was primarily due to lower automation license fees expense of $3.4 million, expense reversal associated with an amount that was no longer due to a sub-contractor of $1.9 million, compensation expense of $0.5 million, restructuring costs of $0.4 million, conference expense of $0.4 million, bad debt expense of $0.3 million and contract labor expense of $0.2 million. These costs were partially offset by higher legal reserves of $1.8 million, stock-based compensation expense of $0.9 million and travel and entertainment expense of $0.8 million.
17
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 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 $1.2 million and $1.6 million for the second quarters of 2025 and 2024, respectively. The decrease of $0.5 million was primarily due to the sale of our Automation business on October 1, 2024. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.
We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions is not amortized, but is subject to annual impairment testing and interim impairment tests, if triggering events are identified.
Other Income (Expense), Net
The following table presents a breakdown of other income (expense), net:
Three Months Ended June 30,
Percent
Other income (expense), net
2025
2024
Change
Change
($ in thousands)
Interest income
$
37
$
222
$
(185)
(83)
%
Interest expense
(1,046)
(1,568)
522
33
%
Foreign currency transaction (loss) gain
(96)
13
(109)
(838)
%
Total other expense, net
$
(1,105)
$
(1,333)
$
228
17
%
The total decrease in other expenses of $0.2 million, or approximately 17% in the second quarter of 2025 compared to the second quarter of 2024, was primarily the result of lower interest expense attributable to a lower debt balance.
18
Income Tax Expense
Our quarterly effective tax rate varies from period to period based on the mix of our earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the quarter ended June 30, 2025 was 38.7% compared to 12.0% for the quarter ended June 30, 2024. The difference for the quarter ended June 30, 2025 was primarily due to the impact of an increase in pre-tax earnings. The Company’s effective tax rate for the quarter ended June 30, 2025 was higher than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves or valuation allowances during the quarter ended June 30, 2025.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND JUNE 30, 2024
Revenues
The following table presents a breakdown of our revenue by geographic area:
Six Months Ended June 30,
Percent
Geographic Area
2025
2024
Change
Change
($ in thousands)
Americas
$
80,482
$
80,821
$
(339)
(0)
%
Europe
30,432
36,598
(6,166)
(17)
%
Asia Pacific
10,234
11,113
(879)
(8)
%
Total revenues
$
121,148
$
128,532
$
(7,384)
(6)
%
Revenues decreased $7.4 million, or approximately 6%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The revenue for the Americas was flat with an increase in Consulting partially offset by a decrease in Automation (excluding the prior year Automation revenue due to sale of the Automation service line, revenues would have reported an increase of 16%). The decrease in revenue in Europe was primarily attributable to a decrease in Automation, NaSa, and GovernX service lines (excluding the prior year Automation revenue, revenues would have reported a decrease of 10%). The revenue decrease in Asia Pacific was primarily attributable to a decrease in our Consulting, and NaSa service lines. The translation of foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $0.4 million.
Operating Expenses
The following table presents a breakdown of our operating expenses by category:
Six Months Ended June 30,
Percent
Operating Expenses
2025
2024
Change
Change
($ in thousands)
Direct costs and expenses for advisors
$
69,518
$
79,954
$
(10,436)
(13)
%
Selling, general and administrative
41,299
44,171
(2,872)
(7)
%
Depreciation and amortization
2,270
3,127
(857)
(27)
%
Total operating expenses
$
113,087
$
127,252
$
(14,165)
(11)
%
19
Total operating expenses decreased $14.2 million, or approximately 11%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease in operating expenses was primarily due to lower automation license fees expense of $7.1 million, restructuring costs of $3.0 million, compensation expense of $2.9 million, expense reversal associated with an amount that was no longer due to a sub-contractor of $1.9 million, contract labor expense of $0.9 million, bad debt expense of $0.5 million, conference expense of $0.4 million and computer expense of $0.3 million. These costs were partially offset by higher legal reserves of $1.8 million, stock-based compensation expense of $1.1 million and professional fees of $0.4 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 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 for the six months ended June 30, 2025 and June 30, 2024 were $2.3 million and $3.1 million, respectively. The decrease of $0.9 million was primarily due to the sale of our Automation business on October 1, 2024. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.
We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives. Goodwill related to acquisitions is not amortized but is subject to annual impairment testing and interim impairment tests, if triggering events are identified.
20
Other Income (Expense), Net
The following table presents a breakdown of other income (expense), net:
Six Months Ended June 30,
Percent
Other income (expense), net
2025
2024
Change
Change
($ in thousands)
Interest income
$
92
$
479
$
(387)
(81)
%
Interest expense
(2,102)
(3,068)
966
31
%
Foreign currency transaction (loss) gain
(93)
6
(99)
n/a
%
Total other income (expense), net
$
(2,103)
$
(2,583)
$
480
19
%
The total decrease in other expenses of $0.5 million, or approximately 19%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, was primarily the result of lower interest expense attributable to a lower debt balance, partially offset by lower interest income.
Income Tax Expense
Our six months 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 six months ended June 30, 2025 was 38.4% compared to (3.7%) for the six months ended June 30, 2024. The difference for the six months ended June 30, 2025 was primarily due to the impact of an increase in pre-tax earnings. The Company’s effective tax rate for the six months ended June 30, 2025 was higher 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 six months ended June 30, 2025.
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 (the “SEC”), 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, acquisition and disposition-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 and disposition-related costs, severance, integration and other expense, 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 some investors believe may obscure the user’s overall understanding of the Company’s current
21
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 June 30,
Six Months Ended June 30,
2025
2024
2025
2024
($ in thousands)
Net income (loss)
$
2,183
$
2,038
$
3,671
$
(1,351)
Plus:
Interest expense (net of interest income)
1,009
1,346
2,010
2,589
Income taxes provision
1,377
279
2,287
48
Depreciation and amortization
1,165
1,622
2,270
3,127
Interest accretion associated with contingent consideration
9
31
20
57
Acquisition and disposition-related costs (1)
123
—
203
25
Severance, integration and other expense
332
698
715
3,677
Foreign currency transaction loss (gain)
96
(13)
93
(6)
Non-cash stock compensation
2,004
1,112
4,424
3,361
Adjusted EBITDA
$
8,298
$
7,113
$
15,693
$
11,527
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
($ in thousands)
Net income (loss)
$
2,183
$
2,038
$
3,671
$
(1,351)
Plus:
Non-cash stock compensation
2,004
1,112
4,424
3,361
Intangible amortization
318
738
637
1,492
Interest accretion associated with contingent consideration
9
31
20
57
Acquisition and disposition-related costs (1)
123
—
203
25
Severance, integration and other expense
332
698
715
3,677
Foreign currency transaction loss (gain)
96
(13)
93
(6)
Tax effect (2)
(922)
(821)
(1,949)
(2,754)
Adjusted net income
$
4,143
$
3,783
$
7,814
$
4,501
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
Net income (loss) per diluted share
$
0.04
$
0.04
$
0.07
$
(0.03)
Non-cash stock compensation
0.04
0.02
0.09
0.07
Intangible amortization
0.01
0.02
0.01
0.03
Interest accretion associated with contingent consideration
0.00
0.00
0.00
0.00
Acquisition and disposition-related costs (1)
0.00
-
0.00
0.00
Severance, integration and other expense
0.01
0.02
0.02
0.08
Foreign currency transaction loss (gain)
0.00
(0.00)
0.00
(0.00)
Tax effect (2)
(0.02)
(0.02)
(0.03)
(0.06)
Adjusted net income per diluted share
$
0.08
$
0.08
$
0.16
$
0.09
(1) Consists of expenses from acquisition and disposition-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.
22
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 June 30, 2025, our cash, cash equivalents and restricted cash totaled $25.3 million compared to $23.2 million as of December 31, 2024, a net increase of $2.1 million, which was primarily attributable to the following:
● net cash provided by operating activities of $12.9 million;
● repayment of outstanding debt of $5.0 million;
● proceeds from revolving facility of $5.0 million;
● cash dividends paid to shareholders of $4.6 million;
● purchase of furniture, fixtures and equipment of $1.7 million;
● proceeds from the sale of the Automation business of $2.0 million;
● treasury shares repurchased of $4.7 million;
● payments related to tax withholding for stock-based compensation of $2.6 million;
● payment of contingent consideration of $0.6 million; and
● proceeds from issuance of employee stock purchase plan shares of $0.3 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
23
margin. The applicable margin is adjusted quarterly based upon the Company’s consolidated leverage ratio. For the first quarter of 2025, applicable margin was decreased by 0.25% percentage of the revolving loans maintaining a Base Rate loans of 1.75% 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 provisions.
The Company’s financial statements include outstanding borrowings of $59.2 million at both June 30, 2025 and December 31, 2024, 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 $59.6 million at both June 30, 2025 and December 31, 2024. 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 6.1% and 6.4% as of June 30, 2025 and December 31, 2024, 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 six months ended June 30, 2025, the Company borrowed $5.0 million and repaid $5.0 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 sufficient amounts or on terms acceptable to us in the future.
Dividend Program
On August 5, 2025, the Company’s Board of Directors (the “Board”) approved a third-quarter dividend of $0.045 per share, payable on September 26, 2025, to shareholders of record as of September 5, 2025. 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.
24
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, 2024.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.