Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 28, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Information Services Group Inc. | |
Entity Central Index Key | 1,371,489 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 43,283,630 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 25,470 | $ 34,485 |
Accounts and unbilled receivables, net of allowance of $476 and $494, respectively | 69,986 | 64,662 |
Deferred tax asset | 1,730 | |
Prepaid expense and other current assets | 4,644 | 5,374 |
Total current assets | 100,100 | 106,251 |
Restricted cash | 89 | 497 |
Furniture, fixtures and equipment, net | 4,408 | 4,789 |
Goodwill | 86,162 | 85,940 |
Intangible assets, net | 30,334 | 35,113 |
Other assets | 4,496 | 2,532 |
Total assets | 225,589 | 235,122 |
Current liabilities | ||
Accounts payable | 8,055 | 9,724 |
Current maturities of long-term debt | 7,126 | 5,546 |
Deferred revenue | 9,197 | 9,112 |
Accrued expenses | 22,128 | 27,971 |
Total current liabilities | 46,506 | 52,353 |
Long-term debt, net of current maturities | 112,577 | 116,485 |
Deferred tax liability | 396 | |
Other liabilities | 6,772 | 7,476 |
Total liabilities | 165,855 | 176,710 |
Commitments and contingencies (Note 6) | ||
Redeemable non-controlling interest | 1,376 | |
Stockholders' equity | ||
Preferred stock, $.001 par value; 10,000 shares authorized; none issued | ||
Common stock, $.001 par value, 100,000 shares authorized; 44,467 shares issued and 43,177 outstanding at June 30, 2017 and 44,203 shares issued and 42,140 outstanding at December 31, 2016 | 44 | 44 |
Additional paid-in capital | 227,309 | 228,692 |
Treasury stock (1,290 and 2,063 common shares, respectively, at cost) | (4,577) | (8,216) |
Accumulated other comprehensive loss | (6,451) | (7,800) |
Accumulated deficit | (156,591) | (155,684) |
Total stockholders' equity | 59,734 | 57,036 |
Total liabilities, redeemable non-controlling interest and stockholders’ equity | $ 225,589 | $ 235,122 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowances (in dollars) | $ 476 | $ 494 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000 | 10,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 44,467 | 44,203 |
Common stock, shares outstanding | 43,177 | 42,140 |
Treasury stock, shares | 1,290 | 2,063 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Revenues | $ 68,038 | $ 60,354 | $ 134,593 | $ 110,283 |
Operating expenses | ||||
Direct costs and expenses for advisors | 40,253 | 36,106 | 80,939 | 67,474 |
Selling, general and administrative | 23,380 | 19,104 | 45,105 | 35,815 |
Depreciation and amortization | 3,859 | 1,927 | 6,822 | 3,645 |
Operating income | 546 | 3,217 | 1,727 | 3,349 |
Interest income | 34 | 2 | 79 | 24 |
Interest expense | (1,707) | (566) | (3,416) | (994) |
Foreign currency transaction (loss) gain | (101) | 244 | (181) | (262) |
(Loss) income before taxes | (1,228) | 2,897 | (1,791) | 2,117 |
Income tax (benefit) provision | (923) | 1,234 | (915) | 1,105 |
Net (loss) income | (305) | 1,663 | (876) | 1,012 |
Net (loss) income attributable to non-controlling interest | (3) | 51 | 32 | 99 |
Net (loss) income attributable to ISG | $ (302) | $ 1,612 | $ (908) | $ 913 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 43,058 | 35,609 | 42,687 | 36,475 |
Diluted (in shares) | 43,058 | 36,719 | 42,687 | 37,029 |
(Loss) earnings per share attributable to ISG: | ||||
Basic (in dollars per share) | $ (0.01) | $ 0.05 | $ (0.02) | $ 0.03 |
Diluted (in dollars per share) | $ (0.01) | $ 0.04 | $ (0.02) | $ 0.03 |
Comprehensive income: | ||||
Net (loss) income | $ (305) | $ 1,663 | $ (876) | $ 1,012 |
Foreign currency translation, net of tax (expense) benefit of $(563), $456, $(929) and $66, respectively. | 678 | (745) | 1,349 | (109) |
Comprehensive income | 373 | 918 | 473 | 903 |
Comprehensive (loss) income attributable to non-controlling interest | (3) | 51 | 32 | 99 |
Comprehensive income attributable to ISG | $ 376 | $ 867 | $ 441 | $ 804 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Foreign currency translation, net of tax benefit (expense) | $ (563) | $ 456 | $ (929) | $ 66 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities | ||
Net (loss) income | $ (876) | $ 1,012 |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation expense | 2,071 | 988 |
Amortization of intangible assets | 4,751 | 2,657 |
Tax expense from stock issuances | 289 | 14 |
Amortization of deferred financing costs | 510 | 84 |
Loss on sublease | 578 | |
Stock-based compensation | 3,510 | 3,315 |
Change in fair value of contingent consideration | (19) | |
Changes in accounts receivable allowance | 251 | 186 |
Deferred tax benefit | (1,860) | (965) |
Loss on disposal of fixed assets | 14 | 1 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | (5,526) | (874) |
Prepaid expense and other assets | 995 | (1,046) |
Accounts payable | (1,670) | 913 |
Deferred revenue | 21 | (1,483) |
Debt issuance costs | (38) | 198 |
Accrued expenses | (1,345) | 1,552 |
Net cash provided by operating activities | 1,675 | 6,533 |
Cash flows from investing activities | ||
Acquisitions, net of cash acquired | (889) | (1,862) |
Restricted cash | 408 | 61 |
Purchase of furniture, fixtures and equipment | (1,479) | (1,216) |
Net cash used in investing activities | (1,960) | (3,017) |
Cash flows from financing activities | ||
Proceeds from debt | 13,500 | |
Principal payments on borrowings | (2,768) | (4,288) |
Proceeds from issuance of ESPP shares | 306 | 295 |
Payment of contingent consideration | (2,594) | (2,483) |
Payment for acquisition of Experton | (542) | |
Payments related to tax withholding for stock-based compensation | (1,963) | (1,182) |
Debt issuance costs | 9 | |
Tax expense from stock issuances | (14) | |
Equity securities repurchased | (2,729) | (11,047) |
Net cash used in financing activities | (10,290) | (5,210) |
Effect of exchange rate changes on cash | 1,560 | (60) |
Net decrease in cash and cash equivalents | (9,015) | (1,754) |
Cash and cash equivalents, beginning of period | 34,485 | 17,835 |
Cash and cash equivalents, end of period | 25,470 | 16,081 |
Noncash financing activities: | ||
Issuance of treasury stock for vested restricted stock awards | $ 5,960 | $ 3,839 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 6 Months Ended |
Jun. 30, 2017 | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Information Services Group, Inc. (the “Company”, or “ISG”) was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. In 2007, we consummated our initial public offering and completed the acquisition of TPI Advisory Services Americas, Inc. (“TPI”). In December 2016, we consummated our transformational acquisition of Alsbridge Holdings, Inc. (“Alsbridge”). |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2017 | |
BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | NOTE 2—BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements as of June 30, 2017 and for the three and six months ended June 30, 2017 and 2016, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are considered necessary for a fair statement of the financial position of the Company as of June 30, 2017, the results of operations for the three and six months ended June 30, 2017 and 2016 and the cash flows for the six months ended June 30, 2017 and 2016. The condensed consolidated balance sheet as of December 31, 2016 has been derived from the Company’s audited consolidated financial statements. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2016, which are included in the Company’s 2016 Annual Report on Form 10-K filed with the SEC. Reclassification Certain prior years’ amounts have been reclassified to conform to the current year’s presentation, including reclassification to the Condensed Consolidated Statements of Cash Flows due to the adoption of the share-based payment accounting standard in the first quarter of 2017 as further described below under Note 3—Summary of Significant Accounting Policies: Recently Issued Accounting Pronouncements. This reclassification had no impact on our results of operations, financial position, or changes in shareholders’ equity. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the proportional performance method of accounting affect the amounts of revenues, expenses, unbilled receivables and deferred revenue. Numerous internal and external factors can affect estimates. Estimates are also used for, but not limited to: allowance for doubtful accounts, useful lives of furniture, fixtures and equipment, depreciation expense, contingent consideration, fair value assumptions in analyzing goodwill and intangible asset impairments, income taxes and deferred tax asset valuation, and the valuation of stock based compensation. Fair Value The carrying value of the Company’s cash and cash equivalents, restricted cash, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at June 30, 2017 and December 31, 2016 due to the short-term nature of these instruments. Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy: · Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; · Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and · Level 3 measurements include those that are unobservable and of a highly subjective measure. The following tables summarize assets and liabilities measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements June 30, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 5,533 $ — $ — $ 5,533 Total $ 5,533 $ — $ — $ 5,533 Liabilities: Contingent consideration (1) $ — $ — $ 3,665 $ 3,665 Total $ — $ — $ 3,665 $ 3,665 Basis of Fair Value Measurements December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 22 $ — $ — $ 22 Total $ 22 $ — $ — $ 22 Liabilities: Contingent consideration (1) $ — $ — $ 6,073 $ 6,073 Total $ — $ — $ 6,073 $ 6,073 (1) The short-term portion is included in “Accrued expenses.” The long-term portion is included in “Other liabilities.” The Company’s contingent consideration liability was $3.7 million and $6.1 million at June 30, 2017 and December 31, 2016, respectively. The fair value measurement of this contingent consideration is classified within Level 3 of the fair value hierarchy and reflects the Company’s own assumptions in measuring fair values using the income approach. In developing these estimates, the Company considered certain performance projections, historical results, and industry trends. This amount was estimated through a valuation model that incorporated probability-weighted assumptions related to the achievement of these milestones and the likelihood of the Company making payments. These cash outflow projections have then been discounted using a rate ranging from 13.5% to 19.8%. The Company’s financial instruments include outstanding borrowings of $122.5 million at June 30, 2017 and $125.3 million at December 31, 2016, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company's outstanding borrowings is approximately $122.4 million and $124.9 million at June 30, 2017 and December 31, 2016, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows ranged from 2.00% to 4.80%. 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. The following table represents the change in the contingent consideration liability during the six months ended June 30, 2017 and 2016: Six Months Ended June 30, 2017 2016 Beginning Balance $ 6,073 $ 4,019 Payment of contingent consideration (3,245) (2,483) Acquisitions — 4,634 Change in fair value of contingent consideration — (19) Accretion of contingent consideration 739 152 Unrealized gain (loss) related to currency translation 98 (40) Ending Balance $ 3,665 $ 6,263 Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that outlines a single comprehensive model for entities to use in accounting for revenue. Under the guidance, revenue is recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard is effective for public entities with annual and interim reporting periods beginning after December 15, 2016. On July 9, 2015, the FASB approved the deferral of the effective date of the new revenue guidance by one year to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective transition method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The guidance also requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which we are currently compiling. We have completed an initial assessment of the impact of the guidance on our existing revenue recognition policies. We currently anticipate that we will see the most impact in contracts which include variable consideration, Network Contingency, subscription services around Robotic Process Automation, and will be adopting the standard using the cumulative catch-up transition method of adoption on January 1, 2018. The Company is currently evaluating the impact of adoption of this guidance, including required disclosures, and based upon our current analysis, does not expect a significant impact on processes, systems or controls. We will continue to evaluate the impact of our pending adoption of this guidance to our consolidated financial statements and our preliminary assessments are subject to change. In November 2015, the FASB issued an accounting standards update to simplify the presentation of deferred income taxes on the balance sheet. The update requires that all deferred tax assets and liabilities be classified as noncurrent. The current guidance that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not impacted by this update. The provisions of the new standard are effective beginning January 1, 2017, for annual and interim periods and early adoption is permitted. The Company adopted this guidance on a prospective method; therefore, prior periods were not retrospectively adjusted. As a result of this adoption, $1.5 million of net current deferred tax assets are included in the net noncurrent deferred tax assets as of June 30, 2017. The adoption of this guidance in the first quarter of 2017 by the Company did not have a material impact on its results of operations. In February 2016, the FASB issued guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The guidance requires the use of a modified retrospective approach. The Company is evaluating the impact of the guidance on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, amended guidance related to employee share-based payment accounting. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allows an employer to repurchase more of an employee’s shares than previously allowed for tax withholding purposes without triggering liability accounting, allows a company to make a policy election to account for forfeitures as they occur, and eliminates the requirement that excess tax benefits be realized before companies can recognize them. The new guidance also requires excess tax benefits and tax shortfalls to be presented on the cash flow statement as an operating activity rather than as a financing activity, and clarifies that cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation are to be presented as a financing activity. This guidance is effective prospectively for annual reporting periods, and interim periods therein, beginning after December 15, 2016. We have adopted ASU 2016-09 effective January 1, 2017 on a prospective basis as permitted by the new standard. As a result of this adoption: · Tax expenses of $0.3 million were recognized on stock-based compensation expense were reflected as a component of the provision for income taxes for the six months ended June 30, 2017. · We elected to adopt the cash flow presentation of the excess tax benefits prospectively where these benefits are classified along with other income tax cash flows as operating cash flows. · We have elected to continue to estimate the number of stock-based awards expected to vest, rather than electing to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period. · We presented employee taxes paid as a financing activity on the Condensed Consolidated Statements of Cash Flows retrospectively, as such the comparable period within the Condensed Consolidated Statements of Cash Flows has been recast to reflect the adoption. The adoption of this guidance in the first quarter of 2017 by the Company did not have a material impact on its results of operations. In August 2016, the FASB issued new guidance intended to reduce diversity in practice in how certain cash receipts and payments are classified in the statement of cash flows, including debt prepayment or extinguishment costs, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, and distributions from certain equity method investees. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application using a retrospective transition method. The Company is evaluating the impact of the guidance on its consolidated financial statements and related disclosures. In November 2016, the FASB issued an accounting standard to requires that amounts generally described as restricted cash and restricted cash equivalents be presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. If different, a reconciliation of the cash balances reported in the cash flow statement and the balance sheet would need to be provided along with explanatory information. The guidance is effective on January 1, 2018. We have started an initial assessment of the impact of the guidance, and we do not expect it will have a material impact on our consolidated financial statements. In January 2017, the FASB issued an accounting standard that changes the GAAP definition of a business which can impact the accounting for asset purchases, acquisitions, goodwill impairment, and other assessments. The guidance is effective on January 1, 2018. We are currently evaluating the impact of this guidance on the Company's consolidated financial statements. In January 2017, the FASB issued an accounting standard that eliminates Step 2 of the goodwill impairment test, which required us to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The updated guidance is effective beginning January 1, 2020, with early adoption permitted, and will be applied on a prospective basis. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. |
NET INCOME PER COMMON SHARE
NET INCOME PER COMMON SHARE | 6 Months Ended |
Jun. 30, 2017 | |
NET INCOME PER COMMON SHARE | |
NET INCOME PER COMMON SHARE | NOTE 4—NET INCOME PER COMMON SHARE Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company. For the three and six months ended June 30, 2017, the effect of 34,374 stock appreciation rights (“SARs”) have not been considered in the diluted earnings per share, because the market price of the stock was less than the exercise price during the period in the computation, respectively. In addition, 1.2 million and 2.5 million restricted shares have not been considered in the diluted earnings per share calculation for the three and six months ended June 30, 2017, respectively, as the effect would be anti-dilutive. The following tables set forth the computation of basic and diluted earnings per share: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Basic: Net (loss) income attributable to ISG $ (302) $ 1,612 $ (908) $ 913 Weighted average common shares 43,058 35,609 42,687 36,475 (Loss) earnings per share attributable to ISG $ (0.01) $ 0.05 $ (0.02) $ 0.03 Diluted: Net (loss) income attributable to ISG $ (302) $ 1,612 $ (908) $ 913 Interest expense of convertible debt, net of tax — 9 — 23 Net (loss) income attributable to ISG, as adjusted $ (302) $ 1,621 $ (908) $ 936 Basic weighted average common shares 43,058 35,609 42,687 36,475 Potential common shares — 1,110 — 554 Diluted weighted average common shares 43,058 36,719 42,687 37,029 Diluted (loss) earnings per share attributable to ISG $ (0.01) $ 0.04 $ (0.02) $ 0.03 |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2017 | |
INCOME TAXES | |
INCOME TAXES | NOTE 5—INCOME TAXES The Company’s effective tax rate for the three and six months ended June 30, 2017 was (75.2)% and (51.1)% based on pretax losses of $1.2 million and $1.8 million, respectively. The Company’s effective tax rate for the quarter was greater than the statutory rate primarily due to the impact of current year overall losses on the effective tax rate computation, and the impact of current quarter losses in jurisdictions where the Company is currently precluded from recording tax benefits. The effective tax rate was 42.6% and 52.2% for the three and six months ended June 30, 2016. The difference is primarily due to the impact of current quarter losses in jurisdictions where the Company is currently precluded from recording tax benefits for the three months ended June 30, 2017. As of June 30, 2017, the Company had total unrecognized tax benefits of approximately $3.1 million all of which would impact the Company’s effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax provision in its condensed consolidated statement of operations. As of June 30, 2017, the Company’s accrual of interest and penalties amounted to $1.1 million. The Company recorded no material year-to-date change in accrual of unrecognized tax benefits and associated interest and penalties. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 6—COMMITMENTS AND CONTINGENCIES The Company is subject to contingencies which arise through the ordinary course of business. All material liabilities of which management were aware are properly reflected in the financial statements at June 30, 2017 and December 31, 2016. Saugatuck Contingent Consideration As of June 30, 2017, the Company has recorded a liability of $0.6 million representing the estimated fair value of contingent consideration related to the acquisition of Saugatuck, of which $0.3 million is classified as current and included in accrued expenses on the consolidated balance sheet. The Company paid $0.5 million in April 2017 related to 2016 performance. Experton Contingent Consideration As of June 30, 2017, the Company has recorded a liability of $0.9 million representing the estimated fair value of contingent consideration related to the acquisition of Experton, of which $0.6 million is classified as current and included in accrued expenses on the consolidated balance sheet. The Company paid $0.1 million in July 2017 related to 2016 performance. TracePoint Contingent Consideration As of June 30, 2017, the Company has recorded a liability of $2.1 million representing the estimated fair value of contingent consideration related to the acquisition of TracePoint, of which $1.1 million is classified as current and included in accrued expenses on the consolidated balance sheet. The Company paid $2.1 million in April 2017 related to 2016 performance. Alsbridge Contingent Consideration As of June 30, 2017, the Company has recorded a liability of $0.1 million representing the estimated fair value of contingent consideration related to the acquisition of Alsbridge, that is classified as current and included in accrued expenses on the consolidated balance sheet. Severance Accrual The Company recorded $1.0 million of severance expense during the three months ended June 30, 2017. The charge was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses. As of June 30, 2017, the remaining balance in accrued severance is $0.3 million. |
REDEEMABLE NON-CONTROLLING INTE
REDEEMABLE NON-CONTROLLING INTEREST | 6 Months Ended |
Jun. 30, 2017 | |
REDEEMABLE NON-CONTROLLING INTEREST | |
REDEEMABLE NONCONTROLLING INTEREST | NOTE 7—REDEEMABLE NON-CONTROLLING INTEREST On May 2, 2017, the minority owner of ISG Italia S.p.A. exercised his put right to sell his 49% ownership interest to a subsidiary of ISG for approximately $0.9 million, and the transaction was consummated on the same day, such that as of May 2, 2017, ISG Italia S.p.A. is a wholly-owned indirect subsidiary of ISG. The following provides a summary of activity in the non-controlling interest account for the periods ended June 30, 2017 and 2016 relating to the acquisition of Convergent Technologies Partners: June 30, 2017 2016 Beginning balance $ 1,376 $ 939 Net income attributable to non-controlling interest 32 99 Accretion attributable to non-controlling interest (30) 38 Purchase of remaining non-controlling interest (1,377) — Impact of currency translation (1) — Ending balance $ — $ 1,076 |
SEGMENT AND GEOGRAPHICAL INFORM
SEGMENT AND GEOGRAPHICAL INFORMATION | 6 Months Ended |
Jun. 30, 2017 | |
SEGMENT AND GEOGRAPHICAL INFORMATION | |
SEGMENT AND GEOGRAPHICAL INFORMATION | NOTE 8—SEGMENT AND GEOGRAPHICAL INFORMATION The Company operates as one reportable segment consisting primarily of fact-based sourcing advisory services. The Company operates principally in the Americas, Europe and Asia Pacific. Geographical revenue information for the segment is as follows: Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Revenues Americas $ 39,952 $ 31,671 $ 81,057 $ 57,593 Europe 21,504 21,221 41,711 40,274 Asia Pacific 6,582 7,462 11,825 12,416 $ 68,038 $ 60,354 $ 134,593 $ 110,283 The segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating income by geography for the purposes of making operating decisions or allocating resources. |
FINANCING ARRANGEMENTS AND LONG
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | 6 Months Ended |
Jun. 30, 2017 | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | NOTE 9—FINANCING ARRANGEMENTS AND LONG-TERM DEBT On December 1, 2016, the Company entered into an amended and restated senior secured credit facility (the “2016 Credit Agreement”) comprised of a $110.0 million term facility and a $30.0 million revolving facility, amending and restating its senior secured credit facility originally entered into on May 3, 2013. The material terms of the 2016 Credit Agreement are as follows: · Each of the term loan facility and revolving credit facility has a maturity date of December 1, 2021 (the “Maturity Date”). · 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) the Eurodollar Rate, plus 1.0%), plus the applicable margin (as defined below) or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent, plus the applicable margin. The applicable margin is adjusted quarterly based upon the Company’s quarterly leverage ratio. Prior to the end of the first full quarter following the closing of the credit facility, the applicable margin shall be a percentage per annum equal to 2.5% for the term loans and the revolving loans maintained as Base Rate loans or 3.5% for the term loans and revolving loans maintained as Eurodollar loans. · The Term Loan is repayable in four consecutive quarterly installments of $1,375,000 each, commencing March 31, 2017, followed by eight consecutive quarterly installments in the amount of $2,062,500 each, commencing March 31, 2018, followed by seven consecutive quarterly installments of $2,750,000 each, commencing March 31, 2020 and a final payment of the remaining outstanding principal amount of the Term Loan on the Maturity Date. · Mandatory repayments of term loans shall be required from (subject to agreed exceptions) (i) 100% of the proceeds from asset sales by the Company and its subsidiaries, (ii) 100% of the net proceeds from issuances of debt and equity by the Company and its subsidiaries, and (iii) 100% of the net proceeds from insurance recovery and condemnation events of the Company and its subsidiaries. · 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 disposition of property or assets, investments (including loans, advances, guarantees and acquisitions), transaction 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 total leverage ratio and fixed charge 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. On February 10, 2017, as required by the 2016 Credit Agreement, the Company entered into an agreement to cap the interest rate at 4% on the LIBOR component of its borrowings under the term loan facility until December 31, 2019. This interest rate cap was not designated for hedging or speculative purposes. The expense related to this interest rate cap was not material. As of June 30, 2017, the total principal outstanding under the term loan facility and revolving credit facility was $107.3 million and $8.0 million, respectively. Compass Convertible Notes On January 4, 2011, as part of the consideration for the acquisition of Compass, we issued an aggregate of $6.3 million in convertible notes to Compass (the “Compass Notes”). The Compass Notes mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Compass Notes. The Compass Notes were subject to transfer restrictions until January 31, 2013. If the price of our common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the “Trigger Event”), the holder of the Compass Notes may convert all (but not less than all) of the outstanding principal amount of the Compass Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, we may prepay all or any portion of the outstanding principal amount of the Compass Notes by giving the holder 30 days written notice. On March 21, 2014, the Trigger Event occurred. As a result, a holder of the Compass Notes may convert all (but not less than all) of the outstanding principal amount of the Compass Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. In addition, ISG may elect to prepay all or any portion of the outstanding principal amount of the Compass Notes by giving a holder 30 days written notice; however, such holder shall be given the opportunity to convert the outstanding principal amount into shares as described above. No holder of the Compass Notes has the option to require cash payment as a result of the Trigger Event, hence the Compass Notes are classified as non-current. In 2013 and 2016, we prepaid substantial portions of the outstanding principal amount of the Compass Notes. As of June 30, 2017, the total principal outstanding under the remaining Compass Notes was $0.2 million. Alsbridge Notes On December 1, 2016, as part of the merger consideration for the acquisition of Alsbridge, we issued an aggregate of $7.0 million in unsecured subordinated promissory notes (the “Alsbridge Notes”). The Alsbridge Notes mature on September 1, 2018 and interest accrues on the principal amount daily at a rate of 2.0% and is payable upon maturity. At any time, the Company may at its option prepay all or any portion of Alsbridge Notes. As of June 30, 2017, the total principal outstanding under the Alsbridge Notes was $7.0 million. |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the proportional performance method of accounting affect the amounts of revenues, expenses, unbilled receivables and deferred revenue. Numerous internal and external factors can affect estimates. Estimates are also used for, but not limited to: allowance for doubtful accounts, useful lives of furniture, fixtures and equipment, depreciation expense, contingent consideration, fair value assumptions in analyzing goodwill and intangible asset impairments, income taxes and deferred tax asset valuation, and the valuation of stock based compensation. |
Fair Value | Fair Value The carrying value of the Company’s cash and cash equivalents, restricted cash, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at June 30, 2017 and December 31, 2016 due to the short-term nature of these instruments. Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy: · Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; · Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and · Level 3 measurements include those that are unobservable and of a highly subjective measure. The following tables summarize assets and liabilities measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements June 30, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 5,533 $ — $ — $ 5,533 Total $ 5,533 $ — $ — $ 5,533 Liabilities: Contingent consideration (1) $ — $ — $ 3,665 $ 3,665 Total $ — $ — $ 3,665 $ 3,665 Basis of Fair Value Measurements December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 22 $ — $ — $ 22 Total $ 22 $ — $ — $ 22 Liabilities: Contingent consideration (1) $ — $ — $ 6,073 $ 6,073 Total $ — $ — $ 6,073 $ 6,073 (1) The short-term portion is included in “Accrued expenses.” The long-term portion is included in “Other liabilities.” The Company’s contingent consideration liability was $3.7 million and $6.1 million at June 30, 2017 and December 31, 2016, respectively. The fair value measurement of this contingent consideration is classified within Level 3 of the fair value hierarchy and reflects the Company’s own assumptions in measuring fair values using the income approach. In developing these estimates, the Company considered certain performance projections, historical results, and industry trends. This amount was estimated through a valuation model that incorporated probability-weighted assumptions related to the achievement of these milestones and the likelihood of the Company making payments. These cash outflow projections have then been discounted using a rate ranging from 13.5% to 19.8%. The Company’s financial instruments include outstanding borrowings of $122.5 million at June 30, 2017 and $125.3 million at December 31, 2016, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company's outstanding borrowings is approximately $122.4 million and $124.9 million at June 30, 2017 and December 31, 2016, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows ranged from 2.00% to 4.80%. 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. The following table represents the change in the contingent consideration liability during the six months ended June 30, 2017 and 2016: Six Months Ended June 30, 2017 2016 Beginning Balance $ 6,073 $ 4,019 Payment of contingent consideration (3,245) (2,483) Acquisitions — 4,634 Change in fair value of contingent consideration — (19) Accretion of contingent consideration 739 152 Unrealized gain (loss) related to currency translation 98 (40) Ending Balance $ 3,665 $ 6,263 |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that outlines a single comprehensive model for entities to use in accounting for revenue. Under the guidance, revenue is recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard is effective for public entities with annual and interim reporting periods beginning after December 15, 2016. On July 9, 2015, the FASB approved the deferral of the effective date of the new revenue guidance by one year to annual reporting periods beginning after December 15, 2017, with early adoption being permitted for annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective transition method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The guidance also requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which we are currently compiling. We have completed an initial assessment of the impact of the guidance on our existing revenue recognition policies. We currently anticipate that we will see the most impact in contracts which include variable consideration, Network Contingency, subscription services around Robotic Process Automation, and will be adopting the standard using the cumulative catch-up transition method of adoption on January 1, 2018. The Company is currently evaluating the impact of adoption of this guidance, including required disclosures, and based upon our current analysis, does not expect a significant impact on processes, systems or controls. We will continue to evaluate the impact of our pending adoption of this guidance to our consolidated financial statements and our preliminary assessments are subject to change. In November 2015, the FASB issued an accounting standards update to simplify the presentation of deferred income taxes on the balance sheet. The update requires that all deferred tax assets and liabilities be classified as noncurrent. The current guidance that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not impacted by this update. The provisions of the new standard are effective beginning January 1, 2017, for annual and interim periods and early adoption is permitted. The Company adopted this guidance on a prospective method; therefore, prior periods were not retrospectively adjusted. As a result of this adoption, $1.5 million of net current deferred tax assets are included in the net noncurrent deferred tax assets as of June 30, 2017. The adoption of this guidance in the first quarter of 2017 by the Company did not have a material impact on its results of operations. In February 2016, the FASB issued guidance on accounting for leases which requires lessees to recognize most leases on their balance sheets for the rights and obligations created by those leases. The guidance requires enhanced disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The guidance requires the use of a modified retrospective approach. The Company is evaluating the impact of the guidance on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, amended guidance related to employee share-based payment accounting. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allows an employer to repurchase more of an employee’s shares than previously allowed for tax withholding purposes without triggering liability accounting, allows a company to make a policy election to account for forfeitures as they occur, and eliminates the requirement that excess tax benefits be realized before companies can recognize them. The new guidance also requires excess tax benefits and tax shortfalls to be presented on the cash flow statement as an operating activity rather than as a financing activity, and clarifies that cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation are to be presented as a financing activity. This guidance is effective prospectively for annual reporting periods, and interim periods therein, beginning after December 15, 2016. We have adopted ASU 2016-09 effective January 1, 2017 on a prospective basis as permitted by the new standard. As a result of this adoption: · Tax expenses of $0.3 million were recognized on stock-based compensation expense were reflected as a component of the provision for income taxes for the six months ended June 30, 2017. · We elected to adopt the cash flow presentation of the excess tax benefits prospectively where these benefits are classified along with other income tax cash flows as operating cash flows. · We have elected to continue to estimate the number of stock-based awards expected to vest, rather than electing to account for forfeitures as they occur to determine the amount of compensation cost to be recognized in each period. · We presented employee taxes paid as a financing activity on the Condensed Consolidated Statements of Cash Flows retrospectively, as such the comparable period within the Condensed Consolidated Statements of Cash Flows has been recast to reflect the adoption. The adoption of this guidance in the first quarter of 2017 by the Company did not have a material impact on its results of operations. In August 2016, the FASB issued new guidance intended to reduce diversity in practice in how certain cash receipts and payments are classified in the statement of cash flows, including debt prepayment or extinguishment costs, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, and distributions from certain equity method investees. The guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The guidance requires application using a retrospective transition method. The Company is evaluating the impact of the guidance on its consolidated financial statements and related disclosures. In November 2016, the FASB issued an accounting standard to requires that amounts generally described as restricted cash and restricted cash equivalents be presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. If different, a reconciliation of the cash balances reported in the cash flow statement and the balance sheet would need to be provided along with explanatory information. The guidance is effective on January 1, 2018. We have started an initial assessment of the impact of the guidance, and we do not expect it will have a material impact on our consolidated financial statements. In January 2017, the FASB issued an accounting standard that changes the GAAP definition of a business which can impact the accounting for asset purchases, acquisitions, goodwill impairment, and other assessments. The guidance is effective on January 1, 2018. We are currently evaluating the impact of this guidance on the Company's consolidated financial statements. In January 2017, the FASB issued an accounting standard that eliminates Step 2 of the goodwill impairment test, which required us to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. The updated guidance is effective beginning January 1, 2020, with early adoption permitted, and will be applied on a prospective basis. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of assets and liabilities measured at fair value on a recurring basis | Basis of Fair Value Measurements June 30, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 5,533 $ — $ — $ 5,533 Total $ 5,533 $ — $ — $ 5,533 Liabilities: Contingent consideration (1) $ — $ — $ 3,665 $ 3,665 Total $ — $ — $ 3,665 $ 3,665 Basis of Fair Value Measurements December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 22 $ — $ — $ 22 Total $ 22 $ — $ — $ 22 Liabilities: Contingent consideration (1) $ — $ — $ 6,073 $ 6,073 Total $ — $ — $ 6,073 $ 6,073 (1) The short-term portion is included in “Accrued expenses.” The long-term portion is included in “Other liabilities.” |
Schedule of change in the contingent consideration liability | Six Months Ended June 30, 2017 2016 Beginning Balance $ 6,073 $ 4,019 Payment of contingent consideration (3,245) (2,483) Acquisitions — 4,634 Change in fair value of contingent consideration — (19) Accretion of contingent consideration 739 152 Unrealized gain (loss) related to currency translation 98 (40) Ending Balance $ 3,665 $ 6,263 |
NET INCOME PER COMMON SHARE (Ta
NET INCOME PER COMMON SHARE (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
NET INCOME PER COMMON SHARE | |
Schedule of computation of basic and diluted earnings per share | Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Basic: Net (loss) income attributable to ISG $ (302) $ 1,612 $ (908) $ 913 Weighted average common shares 43,058 35,609 42,687 36,475 (Loss) earnings per share attributable to ISG $ (0.01) $ 0.05 $ (0.02) $ 0.03 Diluted: Net (loss) income attributable to ISG $ (302) $ 1,612 $ (908) $ 913 Interest expense of convertible debt, net of tax — 9 — 23 Net (loss) income attributable to ISG, as adjusted $ (302) $ 1,621 $ (908) $ 936 Basic weighted average common shares 43,058 35,609 42,687 36,475 Potential common shares — 1,110 — 554 Diluted weighted average common shares 43,058 36,719 42,687 37,029 Diluted (loss) earnings per share attributable to ISG $ (0.01) $ 0.04 $ (0.02) $ 0.03 |
REDEEMABLE NON-CONTROLLING IN19
REDEEMABLE NON-CONTROLLING INTEREST (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
REDEEMABLE NON-CONTROLLING INTEREST | |
Schedules of summary of activity in the non-controlling interest | June 30, 2017 2016 Beginning balance $ 1,376 $ 939 Net income attributable to non-controlling interest 32 99 Accretion attributable to non-controlling interest (30) 38 Purchase of remaining non-controlling interest (1,377) — Impact of currency translation (1) — Ending balance $ — $ 1,076 |
SEGMENT AND GEOGRAPHICAL INFO20
SEGMENT AND GEOGRAPHICAL INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
SEGMENT AND GEOGRAPHICAL INFORMATION | |
Schedule of geographical revenue information for the segment | Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Revenues Americas $ 39,952 $ 31,671 $ 81,057 $ 57,593 Europe 21,504 21,221 41,711 40,274 Asia Pacific 6,582 7,462 11,825 12,416 $ 68,038 $ 60,354 $ 134,593 $ 110,283 |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Liabilities: | |||
Long term debt | $ 122,500 | $ 125,300 | |
Change in the contingent consideration liability | |||
Beginning Balance | 6,073 | $ 4,019 | |
Payment of contingent consideration | (3,245) | (2,483) | |
Acquisitions | 4,634 | ||
Change in fair value of contingent consideration | (19) | ||
Accretion of contingent consideration | 739 | 152 | |
Unrealized gain (loss) related to currency translation | 98 | (40) | |
Ending Balance | $ 3,665 | $ 6,263 | |
Minimum | |||
Liabilities: | |||
Discounted rate of cash outflow projections (as a percent) | 13.50% | ||
Incremental borrowing rate used to discount future cash flows from financial instruments (as a percent) | 2.00% | ||
Maximum | |||
Liabilities: | |||
Discounted rate of cash outflow projections (as a percent) | 19.80% | ||
Incremental borrowing rate used to discount future cash flows from financial instruments (as a percent) | 4.80% | ||
Level 3 | |||
Liabilities: | |||
Fair value of outstanding borrowing | $ 122,400 | 124,900 | |
Recurring | |||
Assets: | |||
Cash equivalents | 5,533 | 22 | |
Total | 5,533 | 22 | |
Liabilities: | |||
Contingent consideration | 3,665 | 6,073 | |
Total | 3,665 | ||
Recurring | Level 1 | |||
Assets: | |||
Cash equivalents | 5,533 | 22 | |
Total | 5,533 | 22 | |
Recurring | Level 3 | |||
Liabilities: | |||
Contingent consideration | 3,665 | $ 6,073 | |
Total | $ 3,665 |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Recently Issued Accounting Pronouncements | |||||
Provision for income taxes | $ (923) | $ 1,234 | $ (915) | $ 1,105 | |
Deferred Tax Assets, Net, Current | $ 1,730 | ||||
ASU 2015-17 | |||||
Recently Issued Accounting Pronouncements | |||||
Deferred Tax Assets, Net, Current | (1,500) | (1,500) | |||
Deferred Tax Assets, Net, Noncurrent | $ 1,500 | 1,500 | |||
ASU 2016-09 | |||||
Recently Issued Accounting Pronouncements | |||||
Provision for income taxes | $ 300 |
NET INCOME PER COMMON SHARE - A
NET INCOME PER COMMON SHARE - Antidilutive Securities (Details) - shares | 3 Months Ended | 6 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | |
Stock Appreciation Rights S A R S | ||
Antidilutive securities | ||
Securities considered antidilutive (in shares) | 34,374 | 34,374 |
Restricted Stock | ||
Antidilutive securities | ||
Securities considered antidilutive (in shares) | 1,200,000 | 2,500,000 |
NET INCOME PER COMMON SHARE - C
NET INCOME PER COMMON SHARE - Computation of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic: | ||||
Net (loss) income attributable to ISG | $ (302) | $ 1,612 | $ (908) | $ 913 |
Weighted average common shares | 43,058 | 35,609 | 42,687 | 36,475 |
(Loss) earnings per share attributable to ISG | $ (0.01) | $ 0.05 | $ (0.02) | $ 0.03 |
Diluted: | ||||
Net (loss) income attributable to ISG | $ (302) | $ 1,612 | $ (908) | $ 913 |
Interest expense of convertible debt, net of tax | 9 | 23 | ||
Net (loss) income attributable to ISG, as adjusted | $ (302) | $ 1,621 | $ (908) | $ 936 |
Basic Weighted Average Common shares | 43,058 | 35,609 | 42,687 | 36,475 |
Potential common shares | 1,110 | 554 | ||
Diluted weighted average common shares | 43,058 | 36,719 | 42,687 | 37,029 |
Diluted (loss) earnings per share attributable to ISG | $ (0.01) | $ 0.04 | $ (0.02) | $ 0.03 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
INCOME TAXES | ||||
Effective income tax rates (as a percent) | (75.20%) | 42.60% | (51.10%) | 52.20% |
Pretax loss | $ 1,228 | $ (2,897) | $ 1,791 | $ (2,117) |
Unrecognized tax benefits | 3,100 | 3,100 | ||
Unrecognized tax benefits that would impact the company's effective tax rate | 3,100 | 3,100 | ||
Interest and penalties accrued | $ 1,100 | $ 1,100 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2017 | Apr. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Contingent Consideration | ||||||
Contingent acquisition liability | $ 3,665 | $ 3,665 | $ 6,073 | $ 6,263 | $ 4,019 | |
Severance Costs | 300 | |||||
Selling, general and administrative | ||||||
Contingent Consideration | ||||||
Severance Costs | 1,000 | |||||
Saugatuck Technology Inc. | ||||||
Contingent Consideration | ||||||
Contingent acquisition liability | 600 | 600 | ||||
Amount paid for contingent consideration | $ 500 | |||||
Saugatuck Technology Inc. | Accrued expenses | ||||||
Contingent Consideration | ||||||
Contingent consideration classified as current | 300 | 300 | ||||
Experton Group | ||||||
Contingent Consideration | ||||||
Contingent acquisition liability | 900 | 900 | ||||
Amount expected to be paid in the second quarter of 2017 related to 2016 performance | 100 | 100 | ||||
Experton Group | Accrued expenses | ||||||
Contingent Consideration | ||||||
Contingent consideration classified as current | 600 | 600 | ||||
TracePoint | ||||||
Contingent Consideration | ||||||
Contingent acquisition liability | 2,100 | 2,100 | ||||
Amount paid for contingent consideration | 2,100 | 2,100 | ||||
TracePoint | Accrued expenses | ||||||
Contingent Consideration | ||||||
Contingent consideration classified as current | 1,100 | 1,100 | ||||
Alsbridge | Accrued expenses | ||||||
Contingent Consideration | ||||||
Contingent acquisition liability | $ 100 | $ 100 |
REDEEMABLE NON-CONTROLLING IN27
REDEEMABLE NON-CONTROLLING INTEREST (Details) - USD ($) $ in Thousands | May 02, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 |
Net income attributable to non-controlling interest | $ (3) | $ 51 | $ 32 | $ 99 | |
Convergent Technologies Partners SPA | |||||
Beginning balance | 1,376 | 939 | |||
Net income attributable to non-controlling interest | 32 | 99 | |||
Accretion attributable to non-controlling interest | (30) | 38 | |||
Purchase of remaining no-ncontrolling interest | (1,377) | ||||
Impact of currency translation | $ (1) | ||||
Ending balance | $ 1,076 | $ 1,076 | |||
ISG Italia S.p.A. | |||||
Ownership interest (as a percentage) | 49.00% | ||||
Ownership interest | $ 900 |
SEGMENT AND GEOGRAPHICAL INFO28
SEGMENT AND GEOGRAPHICAL INFORMATION (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | |
Segment and geographical information | ||||
Number of segments | segment | 1 | |||
Revenues | $ 68,038 | $ 60,354 | $ 134,593 | $ 110,283 |
Americas | ||||
Segment and geographical information | ||||
Revenues | 39,952 | 31,671 | 81,057 | 57,593 |
Europe | ||||
Segment and geographical information | ||||
Revenues | 21,504 | 21,221 | 41,711 | 40,274 |
Asia Pacific | ||||
Segment and geographical information | ||||
Revenues | $ 6,582 | $ 7,462 | $ 11,825 | $ 12,416 |
FINANCING ARRANGEMENTS AND LO29
FINANCING ARRANGEMENTS AND LONG-TERM DEBT - Narrative (Details) - Credit Agreement 2016 | Mar. 31, 2020USD ($)installment | Mar. 31, 2018USD ($)installment | Mar. 31, 2017USD ($)installment | Jun. 30, 2017USD ($) | Dec. 01, 2016USD ($) |
Base Rate | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Interest rate basis | Base Rate | ||||
Eurodollar | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Interest rate basis | Eurodollar Rate | ||||
Applicable margin (as a percent) | 1.00% | ||||
Prime Rate | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Interest rate basis | prime rate | ||||
Federal Funds Rate | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Interest rate basis | Federal Funds Rate | ||||
Applicable margin (as a percent) | 0.50% | ||||
Secured Debt | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Maximum borrowing capacity under senior secured credit facility | $ 110,000,000 | ||||
Outstanding borrowings | $ 107,300,000 | ||||
Number of quarterly installments | installment | 4 | ||||
Periodic repayment | $ 1,375,000 | ||||
Percentage of proceeds from asset sales used for mandatory repayments of the debt | 100.00% | ||||
Percentage of net proceeds from issuances of debt and equity used for mandatory repayments of the debt | 100.00% | ||||
Percentage of net proceeds from insurance recovery and condemnation events used for mandatory repayments of the debt | 100.00% | ||||
Secured Debt | Scenario Forecast | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Number of quarterly installments | installment | 7 | 8 | |||
Periodic repayment | $ 2,750,000 | $ 2,062,500 | |||
Secured Debt | London Interbank Offered Rate L I B O R | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Interest rate basis | LIBOR | ||||
Secured Debt | Base Rate | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Applicable margin (as a percent) | 2.50% | ||||
Revolving Credit Facility | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Maximum borrowing capacity under senior secured credit facility | $ 30,000,000 | ||||
Outstanding borrowings | $ 8,000,000 | ||||
Revolving Credit Facility | Eurodollar | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Applicable margin (as a percent) | 3.50% | ||||
Maximum | Secured Debt | London Interbank Offered Rate L I B O R | |||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |||||
Applicable margin (as a percent) | 4.00% |
FINANCING ARRANGEMENTS AND LO30
FINANCING ARRANGEMENTS AND LONG-TERM DEBT - Compass Convertible Notes (Details) $ / shares in Units, $ in Thousands | Jan. 04, 2011USD ($)$ / shares | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Issuance of debt | $ 13,500 | |||
Amount outstanding | $ 122,500 | $ 125,300 | ||
C C G H Limited | Convertible Notes Payable | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Issuance of debt | $ 6,300 | |||
Rate of interest (as a percent) | 3.875% | |||
Trigger event condition related to number of consecutive trading days on which market price of common stock exceeds $4 per share on the Nasdaq Global Market | 60 days | |||
Conversion rate | 0.25 | |||
Written notice period after trigger event, that company need to serve for prepayment of all or portion of the outstanding principal amount of the Notes | 30 days | |||
Amount outstanding | 200 | |||
Alsbridge | Note payable | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Rate of interest (as a percent) | 2.00% | |||
Amount outstanding | $ 7,000 | |||
Debt, face amount | $ 7,000 | |||
Minimum | C C G H Limited | Convertible Notes Payable | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Trigger Event condition related to minimum market price of common stock on the Nasdaq Global market (in dollars per share) | $ / shares | $ 4 |