ISG cites GEP CONSULTING and GEP SERVICES for their ability to address complex categories in sourcing and spend management, and continued success in global engagements Cements GEP as the ideal global partner for transforming procurement, supply chain and business operations CLARK, N.J., April 16, 2024 /PRNewswire/ -- GEP®, a leading provider of AI-powered procurement and supply chain software, strategy, and managed services to Fortune 500 and Global 2000 enterprises worldwide, announced today that it has b ...

Revenue Performance - Record revenues of $291 million in 2023, representing a 2% increase year-over-year[170] - Recurring revenues reached $125 million, up 16% from the previous year, now accounting for 43% of total revenue[171] - Americas revenue increased by 6% to $177.1 million, while Europe and Asia Pacific revenues decreased by 3% and 10%, respectively[182] - The company aims to reach $150 million in recurring revenues by the end of 2025[171] Expenses and Costs - Total operating expenses rose by 8% to $276.4 million, driven by higher bad debt expense, license fees, and contract labor costs[183] - Interest expense increased from $3.2 million in 2022 to $6.2 million in 2023 due to rising interest rates[169] - Total other expense, net increased by $3.1 million to $(5.851) million in 2023, primarily due to higher interest expense and the write-off of deferred financing costs[191] - The company's effective tax rate for 2023 was 29.8%, up from 26.1% in 2022, driven by higher tax rates in foreign jurisdictions and non-deductible expenses in the U.S.[192] EBITDA and Net Income - Adjusted EBITDA for 2023 was $38 million, a decrease from the prior year[172] - Adjusted EBITDA for 2023 was $37.677 million, compared to $43.256 million in 2022 and $38.812 million in 2021[197] - Adjusted net income for 2023 was $20.076 million, down from $26.908 million in 2022 and $22.882 million in 2021[197] Cash Flow and Liquidity - Net cash provided by operating activities in 2023 was $12.272 million, compared to $11.146 million in 2022 and $41.942 million in 2011[201] - The company's cash, cash equivalents, and restricted cash decreased by $7.9 million to $22.8 million as of December 31, 2023[201] - The company repaid $84.2 million of outstanding debt and paid $8.7 million in cash dividends to shareholders in 2023[202] - The company anticipates that its current cash and ongoing cash flows from operations will be adequate to meet its working capital, capital expenditure, and debt financing needs for at least the next twelve months[206] Debt and Financing - The company amended its senior secured credit facility in 2023, increasing the revolving commitments from $54.0 million to $140.0 million[205] - The company's outstanding borrowings as of December 31, 2023, were $79.2 million, with a fair value of $79.8 million[205] - The company's debt to adjusted EBITDA ratio was 3.25, and it was in compliance with financial covenants under the 2023 Credit Agreement as of December 31, 2023[210] - The company had $79.2 million in total debt principal outstanding as of December 31, 2023, with all debt based on a floating base rate (SOFR)[227] - A 100 basis point change in interest rates would result in an annual change in the company's pre-tax results of operations by $0.8 million[226] - The company's debt to EBITDA ratio was 2.4 times as of December 31, 2023[228] Investments and Acquisitions - The company invested in training over 1,200 employees in AI technology during Q4 2023[172] - Acquisition of Ventana Research added over 40 new clients and nearly two dozen research professionals, enhancing ISG's recurring revenue streams[174] - ISG Tango™ platform launched to capture unadvised transaction activity and target the middle market, which spends $130 billion annually on technology and business services[179] Employee Benefits and Contributions - The company contributed $0.0 million to its 401(k) plan in 2023, compared to $2.1 million in 2022[211] Revenue Recognition Policies - The company's revenue recognition policy involves five steps: identifying the contract, performance obligations, transaction price, allocation, and recognition[214] - Revenue for fixed-fee contracts is recognized proportionally over the term of the contract based on labor hours incurred[217] - Revenue for managed service implementation contracts is recognized over time as a percentage of hours incurred[219] Foreign Currency and Risk Exposure - The impact of foreign currency translation on the company's Statement of Stockholders' Equity was $0.7 million in 2023[231] - The company's exposure to foreign currency risk includes the Euro, British Pound, and Australian dollar, with significant revenues derived from sales outside the United States[229]

Financial Data and Key Metrics Changes - The company reported a net loss of $2.9 million for Q4 2023, compared to a net income of $4.3 million in the prior year, resulting in a loss of $0.06 per fully diluted share [12] - For the full year, the company achieved record revenues of $291 million, a 2% increase despite the overall IT and business services industry declining by 6% [15] - Adjusted net income for Q4 was $3.1 million, down from $6.5 million in the prior year's fourth quarter [12][29] - The company generated nearly $10 million in cash during Q4, the highest amount since 2019 [16] Business Line Data and Key Metrics Changes - Recurring revenues grew by 16% year-over-year, reaching $125 million, which now represents 43% of total revenue, an increase of 500 basis points from the previous year [15] - Q4 revenues from the Americas were $40 million, down 8% year-over-year, while full-year revenues were $173 million, up 4% [18] - Q4 revenues from Europe were $20 million, down 15%, with full-year revenues flat at $90 million [19] - Q4 revenues from Asia Pacific were $6 million, down 12%, with full-year revenues down 5% to $28 million [27] Market Data and Key Metrics Changes - The company noted double-digit growth in consumer, public sector, energy, and utilities industry verticals in the Americas during Q4 [18] - In Europe, double-digit revenue growth was observed in the banking industry vertical and network and software advisory business [19] - The company is seeing demand for AI and digital transformation grow, with a 14% larger pipeline compared to the previous year [10] Company Strategy and Development Direction - The company launched a new enterprise AI advisory business to assist clients with AI adoption strategies [10] - ISG Tango, a new sourcing platform, was introduced to simplify and expedite sourcing processes, expected to capture more unadvised transaction activity and penetrate the mid-market [11][17] - The company aims to achieve a 17% adjusted EBITDA margin by the end of 2025, supported by the anticipated impact of ISG Tango [28] Management's Comments on Operating Environment and Future Outlook - Management indicated that slower client decision-making is influenced by macroeconomic conditions and the complexities surrounding AI adoption [23][88] - The company expects market conditions to improve as inflation cools and clients become more comfortable with AI investments [28] - Management remains optimistic about the future, anticipating an acceleration in client demand throughout 2024 [86] Other Important Information - The company recorded a reserve for bad debt of $4.8 million related to a Dubai-based client, which impacted Q4 results [20] - The balance sheet remains solid, with $22.6 million in cash at the end of Q4, up from $18.7 million at the end of Q3 [21] Q&A Session Summary Question: How willing is the company to negotiate on price and terms due to slower decision-making? - Management clarified that the slowdown is not primarily about price but rather clients needing more time to understand AI and its applications before making decisions [23] Question: What updates can be provided regarding the acquisition made last quarter? - Management expressed satisfaction with the integration process and noted that the acquisition is expected to enhance recurring revenue streams [34] Question: What verticals does management feel best about for the year? - Management highlighted manufacturing, utilities, and the public sector as strong growth areas, with expectations for double-digit growth [64] Question: How is the company addressing the slower decision-making environment? - Management acknowledged that all regions are experiencing slower decision-making but emphasized that the Americas performed well overall despite the challenges [68] Question: What is the outlook for the M&A environment? - Management indicated a continued focus on acquisitions that can add recurring revenue streams, particularly in digital and AI sectors [79]

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) This section provides a comprehensive overview of the company's financial results for Q4 and full-year 2023, highlighting revenue, profitability, and cash flow performance [Fourth-Quarter 2023 Results](index=2&type=section&id=Fourth-Quarter%202023%20Results) ISG's Q4 2023 performance was significantly impacted by slower client decision-making and a large bad-debt reserve. Revenues declined 11% YoY to $66.2 million. The company reported a GAAP net loss of $2.9 million, primarily due to a $4.8 million reserve for a specific client's collection risk. Consequently, adjusted EBITDA fell 47% to $5.9 million, with the margin contracting to 8.9% Q4 2023 Key Financial Metrics | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Reported Revenues | $66.2M | $74.2M | -11% | | Operating (Loss) Income | ($3.5M) | $7.2M | - | | Net (Loss) Income | ($2.9M) | $4.3M | - | | GAAP Diluted (Loss) EPS | ($0.06) | $0.09 | - | | Adjusted Net Income | $3.1M | $6.5M | -52% | | Adjusted Diluted EPS | $0.06 | $0.13 | -54% | | Adjusted EBITDA | $5.9M | $11.1M | -47% | | Adjusted EBITDA Margin | 8.9% | 15.0% | -610 bps | - A significant factor in the quarterly loss was a **$4.8 million reserve** recorded for amounts owed by a client, due to collection risk. Excluding this reserve, net income would have been **$0.8 million** and GAAP EPS **$0.02**[3](index=3&type=chunk)[11](index=11&type=chunk) Q4 2023 Revenue by Region (YoY) | Region | Q4 2023 Revenue (in millions) | Change vs. Q4 2022 | | :--- | :--- | :--- | | Americas | $40.1M | -8% | | Europe | $20.2M | -15% | | Asia Pacific | $5.9M | -12% | [Full-Year 2023 Results](index=3&type=section&id=Full-Year%202023%20Results) For the full year 2023, ISG achieved record revenues of $291.1 million, a 2% increase YoY, outperforming the broader IT and business services industry. However, profitability declined, with operating income at $14.6 million and net income at $6.2 million, significantly lower than 2022, partly due to the Q4 bad-debt reserve. A key positive was the 16% growth in recurring revenues, which reached a record $125 million and now constitute 43% of total revenue Full-Year 2023 Key Financial Metrics | Metric | FY 2023 (in millions) | FY 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Reported Revenues | $291.1M | $286.3M | +2% | | Operating Income | $14.6M | $29.5M | -51% | | Net Income | $6.2M | $19.7M | -68% | | GAAP Diluted EPS | $0.12 | $0.39 | -69% | | Adjusted Net Income | $20.1M | $26.9M | -25% | | Adjusted Diluted EPS | $0.40 | $0.53 | -25% | | Adjusted EBITDA | $37.7M | $43.3M | -13% | | Adjusted EBITDA Margin | 12.9% | 15.1% | -220 bps | - Achieved **record recurring revenues of $125 million**, **up 16%** from the prior year. Recurring revenues now represent **43% of overall revenue**, an increase of **500 basis points**[3](index=3&type=chunk)[4](index=4&type=chunk) Full-Year 2023 Revenue by Region (YoY) | Region | FY 2023 Revenue (in millions) | Change vs. FY 2022 | | :--- | :--- | :--- | | Americas | $173.2M | +4% | | Europe | $89.7M | Flat | | Asia Pacific | $28.1M | -5% | [Other Financial and Operating Highlights](index=3&type=section&id=Other%20Financial%20and%20Operating%20Highlights) The company maintained a healthy cash flow, generating $9.7 million from operations in Q4 and $12.3 million for the full year. The cash balance increased to $22.6 million by year-end. ISG continued its capital return program, paying $2.2 million in dividends and repurchasing $1.7 million of shares in the fourth quarter, while keeping its debt level stable - Generated **$9.7 million of cash from operations** in Q4 2023, compared to **$6.6 million** in Q4 2022. Full-year cash from operations was **$12.3 million**[17](index=17&type=chunk) - Cash balance totaled **$22.6 million** at December 31, 2023, **up 21%** from the end of Q3 2023[17](index=17&type=chunk) - In Q4, the company paid **$2.2 million in dividends** and repurchased **$1.7 million of shares**. Total debt outstanding was **$79.2 million**, unchanged from the prior year[18](index=18&type=chunk) [Business and Strategic Developments](index=2&type=section&id=Business%20and%20Strategic%20Developments) This section details the CEO's perspective on market conditions and the company's strategic initiatives, including the launch of a new AI-powered sourcing platform [CEO Commentary and Market Environment](index=2&type=section&id=CEO%20Commentary%20and%20Market%20Environment) CEO Michael P. Connors acknowledged a soft fourth quarter due to slower client decision-making in an uncertain macro environment but considered the full-year 2% revenue growth solid, especially as the overall IT services industry declined by 6%. He expressed optimism for 2024, expecting client spending to accelerate as inflation cools and interest rates potentially decrease, positioning ISG to benefit from a resurgence in technology and AI investments - The CEO noted that the firm's **2% topline growth** for the year was solid, considering the overall IT and business services industry was **down 6%**[4](index=4&type=chunk) - Profitability was impacted by slower client decision-making and a strategic decision to retain advisory talent in anticipation of a **market uplift later in 2024**[4](index=4&type=chunk) - The company expects client spending to accelerate as 2024 progresses, driven by cooling inflation, potential interest rate cuts, and a resurgence in technology investments, including enterprise AI[4](index=4&type=chunk) [Launch of ISG Tango™ Sourcing Platform](index=2&type=section&id=Launch%20of%20ISG%20Tango%20Sourcing%20Platform) ISG announced the launch of ISG Tango™, a new AI-powered sourcing platform that digitizes and automates sourcing transactions. This strategic initiative is designed to improve transaction speed and efficiency for its enterprise clients and, importantly, to expand ISG's market into the underserved midmarket by offering a more affordable, platform-based advisory solution. This launch complements the company's new Enterprise AI Advisory business - ISG launched **ISG Tango™**, a **groundbreaking sourcing platform** that digitizes all elements of its sourcing transactions business[5](index=5&type=chunk) - The platform is **powered by AI** and leverages ISG's data assets to automate contracting and provide real-time insights, **accelerating time to agreement**[6](index=6&type=chunk) - A key strategic goal for **ISG Tango™** is to **penetrate the underserved midmarket** with an attractive and affordable platform-based offering, expanding revenue opportunities[7](index=7&type=chunk) [Financial Outlook and Shareholder Returns](index=4&type=section&id=Financial%20Outlook%20and%20Shareholder%20Returns) This section outlines the company's financial guidance for Q1 2024 and details the declared quarterly dividend for shareholders [First-Quarter 2024 Guidance](index=4&type=section&id=First-Quarter%202024%20Guidance) For the first quarter of 2024, ISG anticipates revenues to be in the range of $65 million to $67 million and adjusted EBITDA to be between $6.0 million and $7.0 million. The company will continue to monitor the macroeconomic environment Q1 2024 Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Revenues | $65M - $67M | | Adjusted EBITDA | $6.0M - $7.0M | [Quarterly Dividend](index=4&type=section&id=Quarterly%20Dividend) The ISG Board of Directors has declared a first-quarter dividend of $0.045 per share, payable on March 29, 2024, to shareholders of record as of March 19, 2024 - A first-quarter dividend of **$0.045 per share** was declared[3](index=3&type=chunk)[20](index=20&type=chunk) - The dividend is payable on **March 29, 2024**, to shareholders of record as of **March 19, 2024**[20](index=20&type=chunk) [Detailed Financial Statements](index=7&type=section&id=Detailed%20Financial%20Statements) This section presents detailed unaudited financial statements, including income statements, GAAP to non-GAAP reconciliations, and constant currency comparisons [Condensed Statement of Income and Comprehensive Income](index=7&type=section&id=Condensed%20Statement%20of%20Income%20and%20Comprehensive%20Income) This section presents the unaudited GAAP consolidated statements of income for the fourth quarter and full year of 2023, compared to the same periods in 2022. It details revenues, operating expenses, taxes, and net income (loss), along with basic and diluted earnings (loss) per share Income Statement Highlights (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $66,186 | $74,167 | $291,054 | $286,267 | | Operating (loss) income | $(3,522) | $7,169 | $14,612 | $29,480 | | Net (loss) income | $(2,869) | $4,283 | $6,154 | $19,726 | | Diluted (Loss) EPS | $(0.06) | $0.09 | $0.12 | $0.39 | [Reconciliation from GAAP to Non-GAAP](index=8&type=section&id=Reconciliation%20from%20GAAP%20to%20Non-GAAP) This section reconciles GAAP net income to non-GAAP measures like Adjusted EBITDA and Adjusted Net Income for Q4 and the full year 2023. Key adjustments include adding back non-cash stock compensation, intangible amortization, severance costs, and a significant $4.8 million accounts receivable reserve in 2023 Reconciliation to Adjusted EBITDA (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(2,869) | $4,283 | $6,154 | $19,726 | | Key Adjustments | | | | | | Account receivables reserves | $4,822 | $— | $4,822 | $— | | Non-cash stock compensation | $2,380 | $2,028 | $9,132 | $7,460 | | **Adjusted EBITDA** | **$5,907** | **$11,134** | **$37,677** | **$43,256** | Reconciliation to Adjusted Net Income (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(2,869) | $4,283 | $6,154 | $19,726 | | Key Adjustments | | | | | | Account receivables reserves | $4,822 | $— | $4,822 | $— | | Non-cash stock compensation | $2,380 | $2,028 | $9,132 | $7,460 | | Tax effect | $(2,802) | $(1,052) | $(6,551) | $(3,379) | | **Adjusted net income** | **$3,086** | **$6,521** | **$20,076** | **$26,908** | [Constant Currency Comparison](index=9&type=section&id=Constant%20Currency%20Comparison) This table adjusts reported financial results for the impact of foreign currency fluctuations to provide a constant currency comparison. For the full year 2023, constant currency revenue was $285.6 million, representing a 1.7% increase over the prior year's adjusted figure. Full-year constant currency adjusted EBITDA was $38.2 million Constant Currency Data (in thousands) | Metric | Period | As Reported | Constant Currency Adjusted | | :--- | :--- | :--- | :--- | | Revenue | Q4 2023 | $66,186 | $65,109 | | Adjusted EBITDA | Q4 2023 | $5,907 | $6,108 | | Revenue | FY 2023 | $291,054 | $285,571 | | Adjusted EBITDA | FY 2023 | $37,677 | $38,151 | [Supporting Information](index=4&type=section&id=Supporting%20Information) This section provides explanations for non-GAAP financial measures and includes important disclaimers regarding forward-looking statements [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) ISG explains its use of non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, and constant currency data. The company believes these metrics provide a clearer view of its core operating performance by excluding certain non-cash and special charges (like acquisition costs or large reserves) and currency fluctuations, thereby improving comparability between periods for investors and management - ISG uses **non-GAAP measures** to enhance the evaluation of its ongoing operating results by excluding non-cash and certain special charges[24](index=24&type=chunk) - Key **non-GAAP measures** provided are **Adjusted EBITDA**, **Adjusted Net Income**, **Adjusted EPS**, and financial data on a **constant currency basis**[25](index=25&type=chunk) - Constant currency figures are calculated by converting current and prior-period local currency results using the same exchange rates to **eliminate the impact of foreign exchange fluctuations**[26](index=26&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section contains the standard safe harbor statement, cautioning that forward-looking statements regarding future events and performance are not guarantees and are subject to various risks and uncertainties. It lists potential risks, including failure to secure new clients, competition, ability to retain employees, and macroeconomic conditions, that could cause actual results to differ materially from expectations - The press release contains **forward-looking statements** that represent management's current expectations and are **not guarantees of future results**[22](index=22&type=chunk) - **Key risks** include: **failure to secure new engagements**, **ability to hire and retain qualified employees**, **competition**, **currency fluctuations**, and **general political and economic conditions**[22](index=22&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-33287 INFORMATION SERVICES GROUP, INC. (Exact name of Registrant as specified in its charter) Delaware 20-5261587 2187 Atlantic Street ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section outlines the Form 10-Q filing details, registrant status, and common stock outstanding as of July 28, 2023 - The document is a Quarterly Report on Form 10-Q for the period ended **June 30, 2023**, filed by INFORMATION SERVICES GROUP, INC. (Commission File Number 001-33287)[1](index=1&type=chunk) - The registrant is an **Accelerated Filer** and is not a Large accelerated filer, Non-accelerated filer, Smaller reporting company, or Emerging growth company[1](index=1&type=chunk) Common Stock Outstanding | Class | Outstanding at July 28, 2023 (shares) | | :----------------------- | :--------------------------- | | Common Stock, $0.001 par value | 48,557,696 | [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - This report contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions that may cause actual results to differ materially from expectations[3](index=3&type=chunk) - The company undertakes no obligation to publicly release revisions to these statements and advises readers to review risk factors in SEC filings[3](index=3&type=chunk) [PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and related notes for the company [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited condensed consolidated financial statements for Information Services Group, Inc. for the periods ended June 30, 2023, prepared in accordance with GAAP and SEC regulations, with all necessary adjustments made for fair presentation [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (Unaudited, In thousands) | ASSETS | June 30, 2023 | December 31, 2022 | | :------------------------------------------ | :-------------- | :---------------- | | Cash and cash equivalents | $19,568 | $30,587 | | Accounts receivable and contract assets, net | 87,377 | 80,170 | | Total current assets | 112,913 | 115,481 | | Goodwill | 94,954 | 94,972 | | Total assets | $238,730 | $243,028 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | 39,531 | 51,191 | | Long-term debt, net of current maturities | 79,175 | 74,416 | | Total liabilities | 135,269 | 142,597 | | Total stockholders' equity | 103,461 | 100,431 | | Total liabilities and stockholders' equity | $238,730 | $243,028 | [Condensed Consolidated Statement of Income and Comprehensive Income](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20INCOME%20AND%20COMPREHENSIVE%20INCOME) This section presents the unaudited condensed consolidated statements of income and comprehensive income for the periods presented Condensed Consolidated Statement of Income and Comprehensive Income (Unaudited, In thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $74,609 | $70,701 | $153,095 | $143,264 | | Operating income | 4,863 | 7,148 | 11,913 | 14,880 | | Income before taxes | 3,709 | 6,676 | 8,913 | 13,914 | | Net income | $2,333 | $4,957 | $5,824 | $9,887 | | Basic EPS | $0.05 | $0.10 | $0.12 | $0.20 | | Diluted EPS | $0.05 | $0.10 | $0.12 | $0.19 | | Comprehensive income | $2,166 | $2,689 | $5,980 | $7,085 | [Condensed Consolidated Statement of Stockholders' Equity](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20STOCKHOLDERS'%20EQUITY) This section presents the unaudited condensed consolidated statement of stockholders' equity for the six months ended June 30, 2023 Condensed Consolidated Statement of Stockholders' Equity (Unaudited, In thousands) - Six Months Ended June 30, 2023 | Metric | Common Stock (Shares) | Common Stock (Amount, In thousands) | Additional Paid-in-Capital (In thousands) | Treasury Stock (In thousands) | Accumulated Other Comprehensive Loss (In thousands) | Accumulated Deficit (In thousands) | Total Stockholders' Equity (In thousands) | | :------------------------- | :-------------------- | :-------------------- | :------------------------- | :------------- | :----------------------------------- | :------------------ | :------------------------- | | Balance Dec 31, 2022 | 49,472 | $49 | $226,293 | $(7,487) | $(9,677) | $(108,747) | $100,431 | | Net income | — | — | — | — | — | 5,824 | 5,824 | | Other comprehensive loss | — | — | — | — | 156 | — | 156 | | Treasury shares repurchased | — | — | — | (3,531) | — | — | (3,531) | | Cash dividends paid | — | — | (4,186) | — | — | — | (4,186) | | Stock based compensation | — | — | 4,654 | — | — | — | 4,654 | | Balance June 30, 2023 | 49,472 | $49 | $221,094 | $(5,128) | $(9,521) | $(103,033) | $103,461 | [Condensed Consolidated Statement of Cash Flows](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20CASH%20FLOWS) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statement of Cash Flows (Unaudited, In thousands) | Cash Flows From Operating Activities | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net income | $5,824 | $9,887 | | Net cash (used in) provided by operating activities | $(553) | $4,936 | | Cash Flows From Investing Activities | | | | Net cash used in investing activities | $(969) | $(2,104) | | Cash Flows From Financing Activities | | | | Net cash used in financing activities | $(9,524) | $(16,059) | | Net decrease in cash, cash equivalents, and restricted cash | $(10,932) | $(16,055) | | Cash, cash equivalents, and restricted cash, end of period | $19,738 | $31,554 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=9&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering significant accounting policies, recent acquisitions, revenue recognition practices, earnings per share calculations, income tax impacts, commitments and contingencies, segment and geographical revenue breakdown, financing arrangements, and subsequent events [NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS](index=9&type=section&id=NOTE%201%E2%80%94DESCRIPTION%20OF%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) This note describes ISG as a global technology research and advisory firm, detailing its services and strategic vision - Information Services Group, Inc. (ISG) is a global technology research and advisory firm, serving over **900 clients**, including more than **75 of the top 100 enterprises** in its markets[12](index=12&type=chunk) - ISG specializes in digital transformation services (automation, cloud, data analytics), sourcing advisory, managed governance and risk services, network carrier services, technology strategy, change management, and market intelligence[12](index=12&type=chunk) - The company's strategic vision, since its founding in **2006**, is to be a high-growth provider of information-based advisory services, realized through acquisitions and successful operation of market-leading brands[13](index=13&type=chunk) [NOTE 2—BASIS OF PRESENTATION](index=9&type=section&id=NOTE%202%E2%80%94BASIS%20OF%20PRESENTATION) This note explains that the unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC regulations - The unaudited condensed consolidated financial statements are prepared in accordance with **GAAP** for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X[14](index=14&type=chunk) - Management has made all necessary adjustments (normal recurring accruals) for a fair statement of the financial position, results of operations, and cash flows[14](index=14&type=chunk) - Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the full year's expected results, and these interim statements should be read with the **2022 Annual Report on Form 10-K**[14](index=14&type=chunk)[15](index=15&type=chunk) [NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%203%E2%80%94SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines significant accounting policies, including estimates, restricted cash, fair value, and recent pronouncements [Use of Estimates](index=9&type=section&id=Use%20of%20Estimates) This section explains that financial statement preparation involves management estimates and assumptions, which may differ from actual results - The preparation of financial statements requires management to make estimates and assumptions affecting reported amounts, with actual results potentially differing from these estimates[16](index=16&type=chunk)[17](index=17&type=chunk) - Estimates are used for areas such as credit losses, useful lives of assets, goodwill impairment, income taxes, deferred tax asset valuation, and stock-based compensation[17](index=17&type=chunk) [Restricted Cash](index=11&type=section&id=Restricted%20Cash) This section defines restricted cash as funds committed for rent deposits, unavailable for general corporate purposes - Restricted cash consists of funds committed for rent deposits and is not available for general corporate purposes[18](index=18&type=chunk) [Fair Value](index=11&type=section&id=Fair%20Value) This section discusses fair value measurements for financial and nonfinancial assets and liabilities, including contingent consideration - The carrying value of cash, receivables, accounts payable, and other current liabilities approximated their fair values due to their short-term nature[19](index=19&type=chunk) - Fair value measurements are applied to nonfinancial assets and liabilities on a nonrecurring basis, primarily goodwill, intangible assets, and assets/liabilities from business combinations[20](index=20&type=chunk) Fair Value Measurements (Unaudited, In thousands) | Basis of Fair Value Measurements | June 30, 2023 | December 31, 2022 | | :------------------------------- | :------------ | :---------------- | | **Assets:** | | | | Cash equivalents (Level 1) | $18 | $18 | | **Liabilities:** | | | | Contingent consideration (Level 3) | $4,184 | $5,593 | Change in Contingent Consideration Liability (Six Months Ended June 30, 2023, In thousands) | Metric | Amount (In thousands) | | :------------------------------------- | :----- | | Beginning Balance | $5,593 | | Change 4 Growth contingent consideration payment | (1,460) | | Accretion of contingent consideration | 51 | | Ending Balance | $4,184 | [Recently Issued Accounting Pronouncements](index=13&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section details the adoption of new FASB guidance on credit losses, effective January 1, 2023, and its cumulative-effect adjustment - The company adopted new FASB guidance on credit losses for financial assets, using a modified retrospective approach effective **January 1, 2023**[25](index=25&type=chunk) - This adoption resulted in a cumulative-effect adjustment, increasing accumulated deficit and the allowance for credit losses by **$0.1 million**[25](index=25&type=chunk) [NOTE 4—ACQUISITIONS](index=13&type=section&id=NOTE%204%E2%80%94ACQUISITIONS) This note details the company's recent acquisitions, Agreemint and Change 4 Growth, outlining their accounting treatment and impact [Agreemint Acquisition](index=13&type=section&id=Agreemint%20Acquisition) This section describes the acquisition of Agreemint's assets on March 28, 2022, accounted for as an asset acquisition with fair value in software - On **March 28, 2022**, ISG acquired substantially all assets of Agreemint, an automated, platform-based contracting solution[26](index=26&type=chunk) - The transaction was accounted for as an asset acquisition, with the fair value concentrated in software and related intellectual property rights, which are depreciated over **four years**[26](index=26&type=chunk) [Change 4 Growth Acquisition](index=13&type=section&id=Change%204%20Growth%20Acquisition) This section details the acquisition of Change 4 Growth on October 31, 2022, including consideration, goodwill, and intangible assets - On **October 31, 2022**, ISG acquired substantially all assets and assumed certain liabilities of Change 4 Growth, LLC[27](index=27&type=chunk) Change 4 Growth Acquisition Consideration and Allocation (In thousands) | Item | Amount (In thousands) | | :------------------------ | :----- | | Cash consideration | $3,450 | | ISG common stock | 600 | | Contingent consideration | 5,560 | | Total allocable purchase price | $9,988 | | Goodwill | $4,360 | - Goodwill was primarily driven by the inclusion of Change 4 Growth's workforce and organizational change management expertise to enhance ISG's Enterprise Change service line[29](index=29&type=chunk) Change 4 Growth Intangible Assets and Useful Lives | Amortizable Intangible Assets | Purchase Price Allocation (In thousands) | Estimated Useful Lives | | :---------------------------- | :------------------------ | :--------------------- | | Trademark and trade name | $1,100 | 3 years | | Customer relationships | 2,900 | 8 years | | Noncompete agreements | 300 | 2 years | | Total intangible assets | $4,300 | | [NOTE 5—REVENUE](index=14&type=section&id=NOTE%205%E2%80%94REVENUE) This note provides details on revenue recognition, contract balances, and remaining performance obligations, including receivables [Contract Balances](index=15&type=section&id=Contract%20Balances) This section explains how the timing of revenue recognition, billings, and cash collections results in contract assets and liabilities - The timing of revenue recognition, billings, and cash collections results in billed accounts receivables, unbilled receivables (contract assets), and customer advances/deposits (contract liabilities)[33](index=33&type=chunk) Contract Balances (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :---------------- | :------------ | :---------------- | | Contract assets | $40,307 | $32,249 | | Contract liabilities | 6,902 | $7,058 | - Revenue recognized from the January 1, 2023 contract liability balance was **$1.8 million** for the three months and **$5.3 million** for the six months ended June 30, 2023, primarily from subscription contracts[33](index=33&type=chunk) [Remaining Performance Obligations](index=15&type=section&id=Remaining%20Performance%20Obligations) This section states that as of June 30, 2023, the company had $126.0 million in remaining performance obligations, mostly due within twelve months - As of June 30, 2023, the Company had **$126.0 million** in remaining performance obligations, with the majority expected to be satisfied within the next twelve months[34](index=34&type=chunk) [NOTE 6—NET INCOME PER COMMON SHARE](index=15&type=section&id=NOTE%206%E2%80%94NET%20INCOME%20PER%20COMMON%20SHARE) This note explains the calculation of basic and diluted earnings per share, including the treatment of anti-dilutive securities - Basic EPS is calculated by dividing net income by the weighted average common shares outstanding, while diluted EPS includes potential dilution from securities convertible into common stock[35](index=35&type=chunk) - For the three and six months ended June 30, 2023, **0.6 million** and **0.0 million** restricted stock units, respectively, were anti-dilutive and excluded from diluted EPS[35](index=35&type=chunk) Basic and Diluted Earnings Per Share (Unaudited, In thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (In thousands) | $2,333 | $4,957 | $5,824 | $9,887 | | Weighted average common shares (Basic, In thousands) | 48,476 | 48,160 | 48,457 | 48,343 | | Earnings per share (Basic) | $0.05 | $0.10 | $0.12 | $0.20 | | Diluted weighted average common shares (In thousands) | 50,317 | 50,742 | 50,302 | 51,034 | | Diluted earnings per share | $0.05 | $0.10 | $0.12 | $0.19 | [NOTE 7—INCOME TAXES](index=16&type=section&id=NOTE%207%E2%80%94INCOME%20TAXES) This note provides details on the company's effective tax rates and the factors influencing them for the periods presented Effective Tax Rates | Period | Effective Tax Rate | | :----------------------------------- | :----------------- | | Three Months Ended June 30, 2023 | 37.1% | | Three Months Ended June 30, 2022 | 25.7% | | Six Months Ended June 30, 2023 | 34.7% | | Six Months Ended June 30, 2022 | 28.9% | - The effective tax rate for Q2 2023 was impacted by non-deductible expenses, earnings/losses in foreign jurisdictions, and the vesting of restricted stock units[38](index=38&type=chunk) [NOTE 8—COMMITMENTS AND CONTINGENCIES](index=16&type=section&id=NOTE%208%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the company's commitments and contingencies, including the Change 4 Growth contingent consideration liability - The Company is subject to contingencies arising from the ordinary course of business, with all material liabilities properly reflected in the financial statements[39](index=39&type=chunk) [Change 4 Growth Contingent Consideration](index=16&type=section&id=Change%204%20Growth%20Contingent%20Consideration) This section details the $4.2 million contingent consideration liability related to the Change 4 Growth acquisition and a recent payment - As of June 30, 2023, the Company recorded a **$4.2 million** liability for the estimated fair value of contingent consideration related to the Change 4 Growth acquisition[40](index=40&type=chunk) - In April 2023, a contingent consideration payment of **$1.5 million** was made[40](index=40&type=chunk) [NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION](index=16&type=section&id=NOTE%209%E2%80%94SEGMENT%20AND%20GEOGRAPHICAL%20INFORMATION) This note provides information on the company's single reportable segment and its geographical revenue breakdown - The Company operates as one reportable segment, primarily offering fact-based sourcing advisory services across the Americas, Europe, and Asia Pacific[41](index=41&type=chunk) Geographical Revenue Information (Unaudited, In thousands) | Region | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Americas | $42,273 | $39,448 | $90,680 | $80,885 | | Europe | 24,354 | 23,255 | 47,407 | 46,718 | | Asia Pacific | 7,982 | 7,998 | 15,008 | 15,661 | | Total | $74,609 | $70,701 | $153,095 | $143,264 | - Revenue segregation is based on the location of the legal entity performing services; gross profit or operating income is not measured by geography or service line for operational decisions[42](index=42&type=chunk) [NOTE 10—FINANCING ARRANGEMENTS AND LONG-TERM DEBT](index=17&type=section&id=NOTE%2010%E2%80%94FINANCING%20ARRANGEMENTS%20AND%20LONG-TERM%20DEBT) This note details the company's senior secured credit facility, including its amendment, increased revolving commitments, and outstanding debt - On **February 22, 2023**, the Company amended its senior secured credit facility, increasing revolving commitments from **$54.0 million** to **$140.0 million** and eliminating its term loan, with a maturity date of **February 22, 2028**[43](index=43&type=chunk) - The credit facility is secured by equity interests and tangible/intangible assets of the Company and its domestic subsidiaries, with interest rates based on Base Rate or Term SOFR plus an applicable margin[43](index=43&type=chunk) - Outstanding borrowings were **$79.2 million** as of June 30, 2023, and December 31, 2022, with fair values of **$79.9 million** and **$76.5 million**, respectively, and the Company is in compliance with financial covenants[44](index=44&type=chunk) [NOTE 11—SUBSEQUENT EVENTS](index=18&type=section&id=NOTE%2011%E2%80%94SUBSEQUENT%20EVENTS) This note reports no events requiring adjustments to disclosures after the balance sheet date, but notes a new share repurchase authorization and dividend approval - No events occurred after the balance sheet date up to the financial statement issuance date that would require adjustments to disclosures[45](index=45&type=chunk) - On **August 1, 2023**, the Board approved a new **$25.0 million** share repurchase authorization and a third-quarter dividend of **$0.045 per share**[46](index=46&type=chunk) [Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=19&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's discussion and analysis of the company's financial condition, liquidity, and results of operations [BUSINESS OVERVIEW](index=19&type=section&id=BUSINESS%20OVERVIEW) This section provides an overview of Information Services Group, Inc.'s business, strategic objectives, revenue generation methods, and key factors influencing its operational results. The company focuses on strengthening its market position, developing new services, and expanding geographically, while acknowledging potential impacts from macroeconomic conditions and competition - ISG is a leading global technology research and advisory firm, specializing in digital transformation services, sourcing advisory, and market intelligence[49](index=49&type=chunk) - The company's strategy focuses on growing its existing service model, geographical expansion, new industry sectors, productizing market data, expanding managed services, and growth via acquisitions[50](index=50&type=chunk) - Revenues are primarily derived from project-based fees (time and materials or fixed-fee) and recurring revenue streams from annuity-based offerings like ISG GovernX, Research, and Software as a Subscription[51](index=51&type=chunk)[53](index=53&type=chunk) - Results are principally impacted by consultant utilization rates, number of business days, and availability of revenue-generating professionals, with potential negative effects from increased hiring and seasonal demand variations[56](index=56&type=chunk) [RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND JUNE 30, 2022](index=21&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030,%202023%20AND%20JUNE%2030,%202022) This section details the financial performance for the three months ended June 30, 2023, compared to the same period in 2022, highlighting a 6% increase in total revenues driven by growth in the Americas and Europe. Operating expenses rose by 10%, primarily due to higher contract labor and license fees, leading to a decrease in operating income and net income. Interest expense significantly increased, and the effective tax rate also rose [Revenues](index=21&type=section&id=Revenues%20(Three%20Months%20Ended%20June%2030)) This section analyzes the 6% increase in total revenues for Q2 2023, driven by growth in the Americas and Europe Geographical Revenue (Three Months Ended June 30, In thousands) | Geographic Area | 2023 (In thousands) | 2022 (In thousands) | Change (In thousands) | Percent Change | | :---------------- | :------ | :------ | :------ | :------------- | | Americas | $42,273 | $39,448 | $2,825 | 7 % | | Europe | 24,354 | 23,255 | 1,099 | 5 % | | Asia Pacific | 7,982 | 7,998 | (16) | (0)% | | Total revenues | $74,609 | $70,701 | $3,908 | 6 % | - Total revenues increased by **$3.9 million (6%)** for Q2 2023, driven by growth in Advisory, Research, and Network & Software Advisory Services (NaSa) in the Americas, and Automation and Research in Europe[57](index=57&type=chunk) - Foreign currency translation negatively impacted performance in Europe and Asia Pacific by **$0.1 million**[57](index=57&type=chunk) [Operating Expenses](index=21&type=section&id=Operating%20Expenses%20(Three%20Months%20Ended%20June%2030)) This section details the 10% increase in total operating expenses for Q2 2023, primarily due to higher contract labor and license fees Operating Expenses (Three Months Ended June 30, In thousands) | Operating Expenses | 2023 (In thousands) | 2022 (In thousands) | Change (In thousands) | Percent Change | | :-------------------------------- | :------ | :------ | :------ | :------------- | | Direct costs and expenses for advisors | $45,847 | $41,370 | $4,477 | 11 % | | Selling, general and administrative | 22,330 | 20,885 | 1,445 | 7 % | | Depreciation and amortization | 1,569 | 1,298 | 271 | 21 % | | Total operating expenses | $69,746 | $63,553 | $6,193 | 10 % | - Total operating expenses increased by **$6.2 million (10%)** for Q2 2023, primarily due to higher contract labor expense (**$2.0 million**), license fees (**$1.1 million**), compensation expense (**$0.9 million**), and non-cash stock compensation (**$0.7 million**)[58](index=58&type=chunk)[60](index=60&type=chunk) - Depreciation and amortization expense increased by **$0.3 million**, mainly due to the acquisition of Change 4 Growth[65](index=65&type=chunk) [Other Income (Expense), Net](index=23&type=section&id=Other%20Income%20(Expense),%20Net%20(Three%20Months%20Ended%20June%2030)) This section analyzes the $0.7 million increase in total other expenses for Q2 2023, primarily driven by higher interest expense Other Income (Expense), Net (Three Months Ended June 30, In thousands) | Item | 2023 (In thousands) | 2022 (In thousands) | Change (In thousands) | Percent Change | | :------------------------------ | :-------- | :------ | :-------- | :------------- | | Interest income | $97 | $44 | $53 | 120 % | | Interest expense | (1,407) | (610) | (797) | (131)% | | Foreign currency transaction gain | 156 | 94 | 62 | 66 % | | Total other income (expense), net | $(1,154) | $(472) | $(682) | (144)% | - Total other expenses increased by **$0.7 million**, primarily due to higher interest expense resulting from increased interest rates and a higher debt balance[68](index=68&type=chunk) [Income Tax Expense](index=25&type=section&id=Income%20Tax%20Expense%20(Three%20Months%20Ended%20June%2030)) This section discusses the increase in the effective tax rate for Q2 2023 to 37.1%, influenced by foreign earnings and non-deductible expenses - The effective tax rate for Q2 2023 was **37.1%**, up from **25.7%** in Q2 2022, primarily due to the mix of earnings in foreign jurisdictions and the impact of restricted stock unit vesting[69](index=69&type=chunk) - The Q2 2023 effective tax rate was higher than the statutory rate due to non-deductible expenses and foreign earnings[69](index=69&type=chunk) [RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND JUNE 30, 2022](index=25&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20SIX%20MONTHS%20ENDED%20JUNE%2030,%202023%20AND%20JUNE%2030,%202022) This section analyzes the financial performance for the six months ended June 30, 2023, compared to the same period in 2022. Total revenues increased by 7%, mainly driven by the Americas and Europe. Operating expenses grew by 10% due to higher contract labor, license fees, and travel costs. Other expenses significantly increased due to higher interest expense and a write-off of deferred financing costs. The effective tax rate also increased [Revenues](index=25&type=section&id=Revenues%20(Six%20Months%20Ended%20June%2030)) This section analyzes the 7% increase in total revenues for the six months ended June 30, 2023, primarily from growth in the Americas and Europe Geographical Revenue (Six Months Ended June 30, In thousands) | Geographic Area | 2023 (In thousands) | 2022 (In thousands) | Change (In thousands) | Percent Change | | :---------------- | :------- | :------- | :------- | :------------- | | Americas | $90,680 | $80,885 | $9,795 | 12 % | | Europe | 47,407 | 46,718 | 689 | 1 % | | Asia Pacific | 15,008 | 15,661 | (653) | (4)% | | Total revenues | $153,095 | $143,264 | $9,831 | 7 % | - Total revenues increased by **$9.8 million (7%)** for the six months ended June 30, 2023, primarily due to growth in Advisory, NaSa, and GovernX service lines in the Americas, and Automation, Research, and GovernX in Europe[70](index=70&type=chunk) - Foreign currency translation negatively impacted performance in Europe and Asia Pacific by **$2.2 million**[70](index=70&type=chunk) [Operating Expenses](index=25&type=section&id=Operating%20Expenses%20(Six%20Months%20Ended%20June%2030)) This section details the 10% increase in total operating expenses for the six months ended June 30, 2023, driven by higher contract labor and license fees Operating Expenses (Six Months Ended June 30, In thousands) | Operating Expenses | 2023 (In thousands) | 2022 (In thousands) | Change (In thousands) | Percent Change | | :-------------------------------- | :------- | :------- | :------- | :------------- | | Direct costs and expenses for advisors | $95,016 | $85,325 | $9,691 | 11 % | | Selling, general and administrative | 43,000 | 40,472 | 2,528 | 6 % | | Depreciation and amortization | 3,166 | 2,587 | 579 | 22 % | | Total operating expenses | $141,182 | $128,384 | $12,798 | 10 % | - Total operating expenses increased by **$12.8 million (10%)** for the six months ended June 30, 2023, driven by higher contract labor expense (**$4.7 million**), license fees (**$2.7 million**), and travel and entertainment costs (**$1.4 million**)[71](index=71&type=chunk)[73](index=73&type=chunk) - Depreciation and amortization expense increased by **$0.6 million**, primarily due to the Change 4 Growth acquisition[78](index=78&type=chunk) [Other Income (Expense), Net](index=27&type=section&id=Other%20Income%20(Expense),%20Net%20(Six%20Months%20Ended%20June%2030)) This section analyzes the $2.0 million increase in total other expenses for the six months ended June 30, 2023, due to higher interest expense and deferred financing cost write-off Other Income (Expense), Net (Six Months Ended June 30, In thousands) | Item | 2023 (In thousands) | 2022 (In thousands) | Change (In thousands) | Percent Change | | :------------------------------ | :-------- | :------ | :-------- | :------------- | | Interest income | $181 | $89 | $92 | 103 % | | Interest expense | (3,143) | (1,173) | (1,970) | (168)% | | Foreign currency transaction (loss) gain | (38) | 118 | (156) | 132 % | | Total other income (expense), net | $(3,000) | $(966) | $(2,034) | (211)% | - Total other expenses increased by **$2.0 million**, primarily due to higher interest expense from increased interest rates and debt balance, and a **$0.4 million** write-off of deferred financing costs[82](index=82&type=chunk) [Income Tax Expense](index=29&type=section&id=Income%20Tax%20Expense%20(Six%20Months%20Ended%20June%2030)) This section discusses the increase in the effective tax rate for the six months ended June 30, 2023, to 34.7%, influenced by foreign earnings and non-deductible expenses - The effective tax rate for the six months ended June 30, 2023, was **34.7%**, up from **28.9%** in the prior year, mainly due to the impact of earnings/losses in foreign jurisdictions and restricted stock unit vesting[83](index=83&type=chunk) - The effective tax rate was higher than the statutory rate due to non-deductible expenses and foreign operations[83](index=83&type=chunk) [NON-GAAP FINANCIAL PRESENTATION](index=29&type=section&id=NON-GAAP%20FINANCIAL%20PRESENTATION) This section introduces and defines the non-GAAP financial measures used by management and provided to investors, including adjusted EBITDA, adjusted net income, and adjusted net income per diluted share. These measures exclude certain non-cash and special charges to offer a clearer view of the company's core operations and performance comparability [NON-GAAP FINANCIAL MEASURES](index=29&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section defines and reconciles non-GAAP measures like adjusted EBITDA and adjusted net income, used to evaluate core business performance - Non-GAAP measures include adjusted EBITDA, adjusted net income, and adjusted net income per diluted share, which exclude certain expenses and foreign currency translation impacts[85](index=85&type=chunk) - These measures are used by management and provided to investors to evaluate business strategies and performance, improving comparability and transparency by excluding non-cash and special charges[85](index=85&type=chunk) Adjusted EBITDA Reconciliation (In thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (In thousands) | $2,333 | $4,957 | $5,824 | $9,887 | | Plus: Interest expense (net of income, In thousands) | 1,310 | 566 | 2,962 | 1,084 | | Plus: Income taxes (In thousands) | 1,376 | 1,719 | 3,089 | 4,027 | | Plus: Depreciation and amortization (In thousands) | 1,569 | 1,298 | 3,166 | 2,587 | | Plus: Non-cash stock compensation (In thousands) | 2,612 | 1,942 | 4,654 | 3,445 | | Plus: Severance, integration and other expense (In thousands) | 1,076 | 340 | 1,342 | 450 | | Adjusted EBITDA (In thousands) | $10,146 | $10,742 | $21,126 | $21,386 | Adjusted Net Income and Diluted EPS Reconciliation (In thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (In thousands) | $2,333 | $4,957 | $5,824 | $9,887 | | Plus: Non-cash stock compensation (In thousands) | 2,612 | 1,942 | 4,654 | 3,445 | | Plus: Intangible amortization (In thousands) | 789 | 527 | 1,583 | 1,055 | | Plus: Severance, integration and other expense (In thousands) | 1,076 | 340 | 1,342 | 450 | | Plus: Write-off of deferred financing costs (In thousands) | — | — | 379 | — | | Adjusted net income (In thousands) | $5,289 | $6,813 | $11,296 | $13,189 | | Adjusted net income per diluted share | $0.11 | $0.13 | $0.22 | $0.26 | [LIQUIDITY AND CAPITAL RESOURCES](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's financial liquidity and capital resources, outlining primary funding sources, changes in cash and cash equivalents, and details of its senior secured credit facility. It also covers the dividend program, off-balance sheet arrangements, and critical accounting policies, affirming the adequacy of current resources for the next twelve months [Liquidity](index=30&type=section&id=Liquidity) This section identifies primary liquidity sources and explains the $11.0 million decrease in cash, cash equivalents, and restricted cash - Primary liquidity sources are cash flows from operations, existing cash and cash equivalents, and the revolving credit facility[88](index=88&type=chunk) - Cash, cash equivalents, and restricted cash decreased by **$11.0 million** from **$30.7 million** at December 31, 2022, to **$19.7 million** at June 30, 2023[89](index=89&type=chunk) - The decrease was primarily attributable to net cash used in operating activities (**$0.6 million**), cash dividends paid (**$4.2 million**), treasury shares repurchased (**$2.0 million**), and payments for tax withholding on stock-based compensation (**$1.5 million**)[90](index=90&type=chunk) [Capital Resources](index=32&type=section&id=Capital%20Resources) This section details the amended senior secured credit facility, outstanding borrowings, and the company's compliance with financial covenants - The Company amended its senior secured credit facility on **February 22, 2023**, increasing revolving commitments to **$140.0 million** and eliminating its term loan[89](index=89&type=chunk)[90](index=90&type=chunk) - Outstanding borrowings were **$79.2 million** as of June 30, 2023, and December 31, 2022, with fair values of **$79.9 million** and **$76.5 million**, respectively[91](index=91&type=chunk) - The Company anticipates current cash and ongoing cash flows will be adequate for working capital, capital expenditures, and debt financing for at least the next twelve months and is currently in compliance with its financial covenants[92](index=92&type=chunk)[91](index=91&type=chunk) [Dividend Program](index=34&type=section&id=Dividend%20Program) This section outlines the company's quarterly dividend program, including the recent approval of a third-quarter dividend - In **May 2023**, the Company announced a quarterly dividend of **$0.045 per share**, expecting a total cash dividend of **$0.18 per share** for the four quarters ending June 30, 2024[93](index=93&type=chunk) - On **August 1, 2023**, the Board approved a third-quarter dividend of **$0.045 per share**, payable September 28, 2023[93](index=93&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet financing arrangements, liabilities, guarantee contracts, or material variable interests - The Company does not have any off-balance sheet financing arrangements, liabilities, guarantee contracts, or material variable interests in unconsolidated entities[94](index=94&type=chunk) [Recently Issued Accounting Pronouncements](index=34&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to Note 3 for information on recently issued accounting pronouncements - Refer to Note 3 for information on recently issued accounting pronouncements[95](index=95&type=chunk) [Critical Accounting Policies and Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Accounting%20Estimates) This section states that there have been no material changes to critical accounting estimates since the 2022 Annual Report on Form 10-K - There have been no material changes or developments in the evaluation of critical accounting estimates and underlying assumptions since the Annual Report on Form 10-K for the year ended December 31, 2022[97](index=97&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK](index=36&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) This section provides quantitative and qualitative disclosures regarding the company's exposure to market risks [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) This section addresses the company's exposure to interest rate fluctuations, noting that all outstanding debt is based on a floating rate. Despite this, the company believes its total exposure is limited due to its debt to EBITDA ratio and forecasted rates - As of June 30, 2023, the Company had **$79.2 million** in total debt principal outstanding, all based on a floating interest rate (SOFR)[98](index=98&type=chunk)[99](index=99&type=chunk) - Despite exposure to interest rate increases, the Company believes its total exposure is limited due to its debt to EBITDA ratio of **1.8 times** and external bank forecasts[99](index=99&type=chunk) [Foreign Currency Risk](index=36&type=section&id=Foreign%20Currency%20Risk) This section outlines the company's foreign currency risks, including translation and transaction risk from foreign-denominated transactions - A significant portion of revenues are derived from sales outside the U.S., exposing the Company to foreign currency translation and transaction risk, primarily in Euro, British Pound, and Australian dollar[100](index=100&type=chunk) - Translation risk arises from converting foreign currency assets and liabilities into USD, with adjustments deferred to stockholders' equity; historically, this has not materially impacted consolidated earnings[101](index=101&type=chunk) - Transaction risk occurs when transactions are denominated in a currency different from the local functional currency, with gains or losses recorded in current period earnings; in 2022, the impact on revenues was **$12.7 million (4.4% of revenues)**, which was not material[102](index=102&type=chunk) [Credit Risk](index=36&type=section&id=Credit%20Risk) This section addresses the company's credit risk, primarily concentrated in cash equivalents and accounts receivable, mitigated by diverse customers - Concentration of credit risk primarily exists in short-term, highly liquid investments (cash equivalents) and accounts receivable/contract assets[103](index=103&type=chunk) - Credit risk is limited due to the majority of cash and cash equivalents being held with large investment-grade commercial banks and a diverse customer base across geographies[103](index=103&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=37&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the company's disclosure controls and procedures and internal control over financial reporting, confirming their effectiveness [Disclosure Controls and Procedures](index=37&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms that the company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023 - Disclosure controls and procedures are designed to ensure information required for SEC reports is recorded, processed, summarized, and reported timely[104](index=104&type=chunk) - Management, including the CEO and CFO, evaluated the effectiveness of these controls as of **June 30, 2023**, and concluded they were effective[104](index=104&type=chunk) [Internal Control Over Financial Reporting](index=37&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) This section states that there have been no material changes to the company's internal control over financial reporting during the fiscal quarter - There have been no changes in internal control over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[105](index=105&type=chunk) [PART II - OTHER INFORMATION](index=38&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part includes other information such as legal proceedings, risk factors, equity security sales, and recent developments [ITEM 1. LEGAL PROCEEDINGS](index=38&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that there are no legal proceedings to report for the company - There are no legal proceedings to report[108](index=108&type=chunk) [ITEM 1A. RISK FACTORS](index=38&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section indicates that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - The risk factors included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, have not materially changed[109](index=109&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=38&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the company's dividend program and share repurchase activities, including a new authorization [Dividend Program](index=38&type=section&id=Dividend%20Program%20(Part%20II)) This section outlines the company's quarterly dividend program, including the recent approval of a third-quarter dividend - In **May 2023**, the Company announced a quarterly dividend of **$0.045 per share**, with an expected total cash dividend of **$0.18 per share** for the four quarters ending June 30, 2024[110](index=110&type=chunk) - On **August 1, 2023**, the Board approved a third-quarter dividend of **$0.045 per share**, payable September 28, 2023[110](index=110&type=chunk) [Issuer Purchases of Equity Securities](index=38&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) This section details the new $25.0 million share repurchase authorization and the equity securities purchased during Q2 2023 - On **August 1, 2023**, the Board approved a new share repurchase authorization for an additional **$25.0 million**, effective upon completion of the current program, which had approximately **$3.6 million** remaining as of June 30, 2023[111](index=111&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended June 30, 2023, In thousands) | Period | Total Number of Securities Purchased (shares) | Average Price per Security ($) | Total Numbers of Securities Purchased as Part of Publicly Announced Plans (shares) | Approximate Dollar Value Remaining Under Plan (thousands $) | | :---------------- | :----------------------------------- | :--------------------------- | :------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | | April 1 - April 30 | 311 | $5.07 | 311 | $4,874 | | May 1 - May 31 | 127 | $5.13 | 127 | $4,223 | | June 1 - June 30 | 120 | $5.06 | 120 | $3,616 | [ITEM 5. OTHER INFORMATION](index=38&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section includes other relevant information, specifically recent developments regarding changes in the company's executive leadership [Recent Developments](index=39&type=section&id=Recent%20Developments) This section reports executive leadership changes, including the retirement of the CFO and the appointment of a successor - Humberto 'Bert' Alfonso, Executive Vice President and CFO, plans to retire on **August 7, 2023**[115](index=115&type=chunk) - Michael A. Sherrick joined as Executive Advisor, Finance on **July 24, 2023**, and will become Executive Vice President and CFO effective **August 8, 2023**, upon Mr. Alfonso's retirement[115](index=115&type=chunk) [ITEM 6. EXHIBITS](index=39&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of this report, including employment letters, certifications, and XBRL formatted financial statements - The report includes exhibits such as Michael A. Sherrick's Employment Letter, CEO/CFO Certifications (31.1, 31.2, 32.1, 32.2), and Inline XBRL formatted financial statements (101, 104)[116](index=116&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) This section contains the official signatures of the company's authorized officers, confirming the filing of the report - The report is signed by Michael P. Connors, Chairman of the Board and Chief Executive Officer, and Humberto P. Alfonso, Executive Vice President and Chief Financial Officer, on **August 8, 2023**[120](index=120&type=chunk)

Financial Data and Key Metrics Changes - The company reported record second quarter revenues of $75 million, a 6% increase year-over-year, and first half revenues of $153 million, up 9% on an operating basis [3][100] - Second quarter operating income was $4.9 million, down from $7.4 million in the prior year, while net income for the quarter was $2.3 million or $0.05 per fully diluted share, compared to $5 million or $0.10 per fully diluted share in the prior year [9][100] - Adjusted net income for the second quarter was $5.3 million or $0.11 per fully diluted share, down from $6.8 million or $0.13 per fully diluted share in the prior year [9] Business Line Data and Key Metrics Changes - Recurring revenues grew by 21% in the quarter to $32 million, driven by demand for research and platform services, with first half recurring revenues reaching $65 million, representing 42% of total revenue [18] - The company experienced double-digit growth in consumer, banking, health sciences, media, and public sector industry verticals during the quarter [6] Market Data and Key Metrics Changes - Americas reported revenues of $42.3 million, up 7% year-over-year, while Europe revenues were $24 million, up 5%, and Asia Pacific revenues were flat at $8 million [23][20][36] - The company anticipates continued growth in Europe, despite macroeconomic challenges, and expects to see higher growth rates in the second half of the year [30][81] Company Strategy and Development Direction - The company is focused on a disciplined capital allocation strategy, including reinvesting in the business, reducing debt, and pursuing strategic acquisitions to drive long-term shareholder value [19] - The company aims to expand adjusted EBITDA margin by 200 basis points to approximately 17% by 2025 and increase recurring revenues to $150 million [109][25] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for cost optimization and digital transformation services, which are expected to drive future growth [8][94] - The company is mindful of current economic uncertainties that may affect enterprise decision-making in the near term but remains optimistic about growth opportunities [8][21] Other Important Information - The company paid a quarterly dividend for the eighth consecutive quarter, raising it by 12.5% earlier this year [5] - The debt balance at the end of the second quarter was $79.2 million, unchanged from the prior year-end, with a debt to EBITDA ratio of 1.8 times [24] Q&A Session Summary Question: What is the current state of the M&A market? - The company is active in the M&A environment, focusing on a bolt-on strategy to increase recurring revenues and digital capabilities [26] Question: What are the expectations for recurring revenue growth? - The company aims to reach 50% recurring revenues, which could lead to significant multiple expansion [27] Question: How is the sentiment and sales cycle across geographies? - The sentiment remains measured, with decision-making taking longer, but demand is strong [33] Question: What are the growth opportunities in Asia Pacific? - The company expects normal double-digit growth for the Asia Pacific region on a full-year basis, despite flat second quarter revenues [73] Question: How is the company leveraging AI in its services? - The company has been using AI for years and sees it as a growth opportunity, particularly in contract management and automation [50][56]

Information Services Group, Inc. (NASDAQ:III) Q1 2023 Earnings Conference Call May 9, 2023 9:00 AM ET Company Participants Barry Holt - Senior Communications Executive at ISG Michael Connors - Chairman and Chief Executive Officer Humberto Alfonso - Executive Vice President and Chief Financial Officer Conference Call Participants Joe Gomes - Noble Capital Markets Marc Riddick - Sidoti and Company Michael Matheson - Singular Research Vincent Colicchio - Barrington Research David Storm - Stonegate Capital Mark ...

For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-33287 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 INFORMATION SERVICES GROUP, INC. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Emplo ...

Information Services Group, Inc. (NASDAQ:III) Q4 2022 Earnings Conference Call March 10, 2023 9:00 AM ET Company Participants Barry Holt - Investor Relations Michael Connors - Chairman and Chief Executive Officer Bert Alfonso - Executive Vice President and Chief Financial Officer Conference Call Participants Vincent Colicchio - Barrington Research Marc Riddick - Sidoti David Storms - Stonegate Securities Operator Hello, everyone and welcome to the ISG 2022 Fourth Quarter and Full Year Results Call. My name ...