Information Services Group(III) - 2024 Q4 - Annual Report

Revenue Performance - In 2024, total revenues decreased by $43.5 million, or approximately 15%, to$ 247.6 million, primarily due to a decline in Advisory, Network & Software Advisory Services, and Automation service lines [178][184]. - Recurring revenues grew to $118 million, representing 48% of total revenues, driven by the ISG Research business and long-term contracts in the U.S. Public Sector [179]. - The Americas region generated$ 158.9 million in revenue, a decrease of 10%, while Europe and Asia Pacific saw declines of 22% each [184]. Profitability and Financial Metrics - Adjusted EBITDA increased by 11% in the fourth quarter, with the adjusted EBITDA margin improving by 200 basis points, attributed to higher utilization and a better business mix [181]. - Adjusted EBITDA for the year ended December 31, 2024, was $25.1 million, down from$ 37.7 million in 2023, indicating a decrease of approximately 33.4% [200]. - The company reported a net income of $2.8 million for the year ended December 31, 2024, compared to$ 6.2 million in 2023, representing a decline of 54.1% [200]. - The company’s adjusted net income for 2024 was $10.0 million, down from$ 20.1 million in 2023, a decrease of 50.3% [200]. - Adjusted net income per diluted share for 2024 was $0.20, compared to$ 0.40 in 2023, indicating a 50% decline [201]. Debt and Cash Management - The company reduced its debt by $20 million, or 25%, for the year, and paid dividends of$ 9.4 million while repurchasing $7.7 million of ISG shares [178]. - The company’s outstanding debt decreased to$ 59.2 million as of December 31, 2024, from $79.2 million in 2023, reflecting a reduction of 25.3% [210]. - Cash, cash equivalents, and restricted cash increased to$ 23.2 million as of December 31, 2024, from $22.8 million in 2023, a net increase of$ 0.4 million [204]. - The company anticipates that its current cash and ongoing cash flows will be sufficient to meet working capital, capital expenditure, and debt financing needs for at least the next twelve months [215]. - As of December 31, 2024, the company had a debt to adjusted EBITDA ratio of 2.32 and was in compliance with its financial covenants under the 2023 Credit Agreement [216]. Operational Efficiency - Operating expenses decreased by $34.6 million, or approximately 13%, primarily due to lower contract labor and compensation expenses [185]. - Interest expense decreased from$ 6.2 million in 2023 to $5.8 million in 2024, reflecting the company's monitoring of economic conditions [168]. Strategic Initiatives - The launch of the Enterprise AI Advisory business and the AI-enabled sourcing platform ISG Tango™ were key innovations introduced in 2024 [172][175]. - The company sold its automation unit for over$ 20 million in cash, significantly improving its balance sheet and aligning with its advisory focus [177]. - The company has been investing in AI for over two years, positioning itself as a global AI-centered technology research and advisory firm [171]. Tax and Other Financial Considerations - The effective tax rate for the year ended December 31, 2024, was 45.7%, an increase from 29.8% in 2023, primarily due to state taxes and higher foreign tax rates [195]. - Total other expense, net, decreased by $5.3 million to$ (530,000) in 2024, primarily due to a gain of $4.5 million from the sale of the automation business [194]. - A 100 basis point change in interest rates would result in an annual change of$ 0.6 million pre-tax in the company's results of operations [233]. - The company had $59.2 million in total debt principal outstanding as of December 31, 2024, all based on a floating base rate (SOFR) of interest [234]. - The impact of foreign currency translation on the Statement of Stockholders' Equity was$ 1.1 million in 2024 [239]. - The company has limited concentration of credit risk due to its diverse customer base and geographies, with most cash and cash equivalents held with large investment-grade commercial banks [241].