Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 03, 2021 | Jun. 30, 2020 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2020 | ||
Document Transition Report | false | ||
Entity File Number | 001-33287 | ||
Entity Registrant Name | Information Services Group Inc. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 20-5261587 | ||
Entity Address, Address Line One | 2187 Atlantic Street | ||
Entity Address, City or Town | Stamford | ||
Entity Address, State or Province | CT | ||
Entity Address, Postal Zip Code | 06902 | ||
City Area Code | 203 | ||
Local Phone Number | 517-3100 | ||
Title of 12(b) Security | Shares of Common Stock, $0.001 par value | ||
Trading Symbol | III | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 85,143,871 | ||
Entity Common Stock, Shares Outstanding | 48,400,641 | ||
Entity Central Index Key | 0001371489 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 43,730 | $ 18,153 |
Accounts receivable and contract assets, net of allowance of $368 and $343, respectively | 67,473 | 77,076 |
Prepaid expenses and other current assets | 3,412 | 4,572 |
Total current assets | 114,615 | 99,801 |
Restricted cash | 95 | 88 |
Furniture, fixtures and equipment, net | 5,001 | 6,014 |
Right-of-use lease assets | 5,909 | 6,572 |
Goodwill | 91,008 | 85,349 |
Intangible assets, net | 15,064 | 16,605 |
Deferred tax assets | 2,255 | 3,589 |
Other assets | 5,573 | 737 |
Total assets | 239,520 | 218,755 |
Current liabilities | ||
Accounts payable | 11,176 | 8,862 |
Current maturities of long-term debt | 4,300 | 11,000 |
Contract liabilities | 5,121 | 4,935 |
Accrued expenses and other current liabilities | 30,064 | 16,454 |
Total current liabilities | 50,661 | 41,251 |
Long-term debt, net of current maturities | 73,551 | 74,823 |
Deferred tax liabilities | 3,811 | 3,472 |
Operating lease liabilities | 4,332 | 5,013 |
Other liabilities | 8,028 | 4,522 |
Total liabilities | 140,383 | 129,081 |
Commitments and contingencies (Note 13) | ||
Stockholders' equity | ||
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued | ||
Common stock, $0.001 par value, 100,000 shares authorized; 48,297 shares issued and 48,189 outstanding at December 31, 2020 and 48,112 shares issued and 47,478 outstanding at December 31, 2019 | 48 | 48 |
Additional paid-in capital | 248,018 | 245,572 |
Treasury stock (108 and 634 common shares, respectively, at cost) | (256) | (2,051) |
Accumulated other comprehensive loss | (4,671) | (7,138) |
Accumulated deficit | (144,002) | (146,757) |
Total stockholders' equity | 99,137 | 89,674 |
Total liabilities and stockholders' equity | $ 239,520 | $ 218,755 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivables and contract assets, allowances | $ 368 | $ 343 |
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 | 48,297 | 48,112 |
Common stock, shares outstanding | 48,189 | 47,478 |
Treasury stock, shares | 108 | 634 |
CONSOLIDATED STATEMENT OF INCOM
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME | ||
Revenues | $ 249,128 | $ 265,763 |
Operating expenses | ||
Direct costs and expenses for advisors | 149,878 | 153,179 |
Selling, general and administrative | 83,785 | 92,518 |
Depreciation and amortization | 6,196 | 6,708 |
Operating income | 9,269 | 13,358 |
Interest income | 260 | 194 |
Interest expense | (3,563) | (6,267) |
Foreign currency transaction loss | (98) | (146) |
Income before taxes | 5,868 | 7,139 |
Income tax provision | 3,113 | 3,798 |
Net income | $ 2,755 | $ 3,341 |
Weighted average shares outstanding: | ||
Basic | 47,717 | 46,917 |
Diluted | 49,972 | 47,620 |
Earnings per share: | ||
Basic | $ 0.06 | $ 0.07 |
Diluted | $ 0.06 | $ 0.07 |
Comprehensive income: | ||
Net income | $ 2,755 | $ 3,341 |
Foreign currency translation, net of tax expense of $760 and $33, respectively | 2,467 | 17 |
Comprehensive income | $ 5,222 | $ 3,358 |
CONSOLIDATED STATEMENT OF INC_2
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME | ||
Foreign currency translation, tax expense | $ 760 | $ 33 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In-Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total |
Balance at Dec. 31, 2018 | $ 45 | $ 235,998 | $ (203) | $ (7,155) | $ (150,098) | $ 78,587 |
Balance (in shares) at Dec. 31, 2018 | 45,477 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 3,341 | 3,341 | ||||
Other comprehensive income | 17 | 17 | ||||
Treasury shares repurchased | (3,428) | (3,428) | ||||
Proceeds from issuance of ESPP shares | 485 | 218 | 703 | |||
Proceeds from issuance of ESPP shares (in shares) | 171 | |||||
Issuance of treasury shares | (1,362) | 1,362 | ||||
Issuance of common stock for contingent earn-out | $ 1 | 864 | 865 | |||
Issuance of common stock for contingent earn-out (in shares) | 243 | |||||
Issuance of common stock for RSUs vested | $ 2 | (2) | ||||
Issuance of common stock for RSUs vested (in shares) | 2,221 | |||||
Stock based compensation | 9,589 | 9,589 | ||||
Balance at Dec. 31, 2019 | $ 48 | 245,572 | (2,051) | (7,138) | (146,757) | $ 89,674 |
Balance (in shares) at Dec. 31, 2019 | 48,112 | 48,112,000 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 2,755 | $ 2,755 | ||||
Other comprehensive income | 2,467 | 2,467 | ||||
Treasury shares repurchased | (5,166) | (5,166) | ||||
Proceeds from issuance of ESPP shares | (86) | 602 | 516 | |||
Issuance of treasury shares | (6,359) | 6,359 | ||||
Issuance of common stock for RSUs vested (in shares) | 185 | |||||
Stock based compensation | 8,891 | 8,891 | ||||
Balance at Dec. 31, 2020 | $ 48 | $ 248,018 | $ (256) | $ (4,671) | $ (144,002) | $ 99,137 |
Balance (in shares) at Dec. 31, 2020 | 48,297 | 48,297,000 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities | ||
Net income | $ 2,755 | $ 3,341 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation expense | 2,664 | 2,697 |
Amortization of intangible assets | 3,532 | 4,011 |
Deferred tax expense from stock issuances | 969 | 205 |
Write-off of deferred financing costs | 167 | |
Amortization of deferred financing costs | 403 | 610 |
Stock-based compensation | 8,891 | 9,589 |
Change in fair value of contingent consideration | 419 | |
Provisions for accounts receivable | 817 | 75 |
Deferred tax (benefit) provision | (139) | 885 |
Loss on disposal of fixed assets | 3 | |
Changes in operating assets and liabilities: | ||
Accounts receivable and contract assets | 10,065 | (1,363) |
Prepaid expense and other assets | (1,689) | 1,488 |
Accounts payable | 2,070 | 243 |
Contract liabilities | (93) | (1,253) |
Accrued expenses | 13,140 | (94) |
Net cash provided by operating activities | 43,971 | 20,437 |
Cash flows from investing activities | ||
Purchase of furniture, fixtures and equipment | (1,181) | (1,922) |
Neuralify acquisition (Note 4) | (2,317) | |
Net cash used in investing activities | (3,498) | (1,922) |
Cash flows from financing activities | ||
Principal payments on borrowings, net | (8,088) | (12,250) |
Payment of contingent consideration | (865) | |
Proceeds from issuance of employee stock purchase plan shares | 516 | 703 |
Debt financing costs | (934) | |
Payments related to tax withholding for stock-based compensation | (2,023) | (3,094) |
Treasury shares repurchased | (5,166) | (3,428) |
Net cash used in financing activities | (15,695) | (18,934) |
Effect of exchange rate changes on cash | 806 | (65) |
Net increase (decrease) in cash, cash equivalents, and restricted cash | 25,584 | (484) |
Cash, cash equivalents, and restricted cash, beginning of period | 18,241 | 18,725 |
Cash, cash equivalents, and restricted cash, end of period | 43,825 | 18,241 |
Cash paid for: | ||
Interest | 3,114 | 5,690 |
Taxes, net of refunds | 2,536 | 503 |
Non-cash investing and financing activities: | ||
Issuance of treasury stock for vested restricted stock awards | $ 6,359 | $ 1,362 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 12 Months Ended |
Dec. 31, 2020 | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIO NS 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. The Company specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. These consolidated financial statements and footnotes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, references to the Company include ISG and its consolidated subsidiaries. Use of Estimates The preparation of financial statements in conformity with GAAP 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 revenue recognition guidance for contracts in which control is transferred to the customer over time affect the amounts of revenues, expenses, contract assets and contract liabilities. 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 and definite lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation, and the valuation of stock-based compensation. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Any future asset impairment charges, increase in allowance for doubtful accounts, or restructuring charges could be more likely if the negative effects of the COVID-19 pandemic continue and will be dependent on the severity and duration of this crisis. To date, the Company has not observed any material impairments of its assets or a significant change in the fair value of assets due to the COVID-19 pandemic. Business Combinations We have acquired businesses critical to the Company’s long-term growth strategy. Results of operations for acquisitions are included in the accompanying consolidated statement of comprehensive income from the date of acquisition. Acquisitions are accounted for using the purchase method of accounting and the purchase price is allocated to the net assets acquired based upon their estimated fair values at the date of acquisition. The excess of the purchase price over the net assets was recorded as goodwill. Acquisition-related costs are expensed as incurred and recorded in selling, general and administrative expenses. Cash and Cash Equivalents The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents, including certain money market accounts. The Company principally maintains its cash in money market and bank deposit accounts in the United States of America which typically exceed applicable insurance limits. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. Restricted Cash Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes. Accounts Receivable, Contract Assets and Allowance for Doubtful Accounts Our trade receivables primarily consist of amounts due for services already performed. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and historical bad debts. However, our actual experience may vary from these estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision relates to a client’s inability or unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the accompanying consolidated statement of comprehensive income. Historically, the Company’s bad debt reserves and write-offs have not been significant. The provision for unbilled services is recorded as a reduction to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. Historically, the Company’s unbilled receivable reserves and write-offs have not been significant. Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of prepaid expenses for insurance, conferences and deposits for facilities, programs and promotion items. Furniture, Fixtures and Equipment, net Furniture, fixtures and equipment is recorded at cost. Depreciation is computed by applying the straight-line method over the estimated useful life of the assets, which ranges from three to five years . Leasehold improvements are depreciated over the lesser of the useful life of the underlying asset or the lease term, which generally ranges from three to five years . Expenditures for renewals and betterments are capitalized. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any associated gain or loss thereon is reflected in the accompanying consolidated statement of comprehensive income. The Company capitalizes internal-use software and website development costs and records these amounts within Furniture, Fixtures and Equipment, net. Accounting standards require that certain costs related to the development or purchase of internal-use software and systems as well as the costs incurred in the application development stage related to its website be capitalized and amortized over the estimated useful life of the software or system. They also require that costs related to the preliminary project stage, data conversion and post implementation/operation stage of an internal-use software development project be expensed as incurred. During the years ended December 31, 2020 and 2019, the Company capitalized $0.3 million and $0.6 million, respectively, of costs associated with system and website development. Goodwill Our goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by us during our fourth fiscal quarter or more frequently if we believe impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value of the reporting unit is less than its carrying amount. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value then goodwill is tested further for impairment. If the fair value of goodwill is lower than its carrying amount, an impairment loss is recognized in an amount equal to the difference. Subsequent increases in value are not recognized in the financial statements. There was no impairment of goodwill during the years ended December 31, 2020 and 2019, nor were any indicators identified in 2020 or 2019 that would suggest that it is more likely than not that the Company’s reporting unit is impaired. Long-Lived Assets Long lived assets, excluding goodwill and indefinite lived intangibles, to be held and used by the Company are reviewed to determine whether any significant change in the long-lived asset’s physical condition, a change in industry conditions or a reduction in cash flows associated with the asset group that contains the long-lived asset. If these or other factors indicate the carrying amount of the asset group, which is the lowest level for which identifiable cash flows exist that are separately identifiable from other cash flows, may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset group. The fair value of the asset group is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows. Cash flows are generally discounted at an interest rate commensurate with our weighted average cost of capital. Assets are classified as held for sale when the Company has a plan for disposal of certain assets and those assets meet the held for sale criteria. Debt Issuance Costs Costs directly incurred in obtaining long-term financing, typically bank and attorney fees, are deferred and are amortized over the life of the related loan. Deferred issuance costs are classified as a direct deduction to the long-term debt in the accompanying consolidated balance sheet. Amortization of debt issuance costs is included in interest expense and totaled $0.4 million and $0.6 million for the years ended December 31, 2020 and 2019, respectively. Revenue Recognition We recognize our revenues by applying the following five steps: (1) identify the contract with the customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligation(s); and (5) recognize revenue when (or as) the company satisfies the performance obligation(s). We principally derive revenues from fees for services generated on a project by project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is our policy to obtain written agreements from clients prior to performing services or when evidence of enforceable rights and obligations is obtained. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee structure. Revenues for time and materials contracts, which may include capped fees or “not-to-exceed” clauses, are recognized based on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project. For contract with capped fees or not-to-exceed clauses, we monitor our performance and fees billed to ensure that revenue is not recognized in excess of the contractually capped fee. Revenues related to fixed fee contracts are recognized as value is delivered to the customer, consistent with the transfer of control to the customer over time. Revenue for these contracts is recognized proportionally over the term of the contract using an input method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed fee contract performance obligations, which we consider the best available indicator of the pattern and timing in which contract performance obligations are fulfilled and control transfers to the customer. This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for reimbursable expenses. There are situations where the number of hours to complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen events. The results of any revisions in these estimates are reflected in the period in which they become known. For managed service implementation contracts, revenue is recognized over time as a percentage of hours incurred to date as compared to the total expected hours of the implementation, consistent with the transfer of control to the customer. For ongoing managed services contract, revenue is recognized over time, consistent with the weekly or monthly fee specified within such arrangements. We also derive revenues based on negotiating reductions in network costs of companies with the entity’s related service providers and providing other services such as audits of network and communication expenses, and consultation for network architecture. These contracts can be fixed in fees or can be based on the level of savings achieved related to its communications costs. Additionally, these contracts can also have a fixed component and a contingent component that is based on the savings generated by the Company. For network contingency contracts with termination for convenience clauses, revenue is recognized over time due to the existence of provisions for payment for progress incurred to date plus a reasonable profit margin. The contract periods range from a few months to in excess of a year. We also enter into arrangements for the sale of robotics software licenses and related delivery of consulting or implementation services at the same time or within close proximity to one another. Such software-related performance obligations include the sale of software licenses and other software-related services. For software and implementation contracts, revenue associated with the software performance obligation is recognized at the point at which the software is installed, while revenue associated with the implementation service performance obligation is recognized over the software implementation period as a percentage of hours incurred to date as compared to the total expected hours. Revenue associated with events is recognized at the point of time at which the event occurs. Conversely, revenue associated with research subscriptions is recognized over time, as the customer accesses our data or related platforms. The agreements entered into in connection with a project typically allow our clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by us through the effective date of the termination. In addition, from time to time, we enter into agreements with clients that limit our right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit us from performing a defined range of services that we might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team. When we recognize revenues in advance of billing, those revenues are recorded as contract assets. When we receive cash in advance of completing services or earning revenues, those amounts are recorded as contract liabilities. Reimbursable Expenditures Amounts billed to customers for reimbursable expenditures are included in revenues and the associated costs incurred by the Company are included in direct costs and expenses for advisors in the accompanying consolidated statement of comprehensive income. Non-reimbursable amounts are expensed as incurred. Reimbursable expenditures totaled $1.7 million and $9.6 million for the years ended December 31, 2020 and 2019, respectively. The decrease was attributable to pandemic related travel restrictions that occurred throughout the majority of 2020. Direct Costs and Expenses for Advisors Direct costs and expenses for advisors include payroll expenses and advisory fees directly associated with the generation of revenues and other program expenses. Direct costs and expenses for advisors are expensed as incurred. Direct costs and expenses for advisors also include expense accruals for discretionary bonus payments. Bonus accrual levels are adjusted throughout the year based on actual and projected Company performance. Stock-Based Compensation We grant restricted stock units with a fair value that is determined based on the closing price of our common stock on the date of grant. Such grants generally vest ratably over a four - year period for employees and a three-year period for directors. Stock-based compensation expense is recognized ratably over the applicable service period. We follow the provisions of accounting and disclosure requirements for share-based payments, including the measurement and recognition of all share-based compensation under the fair value method. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company places its cash investments with high quality financial institutions. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history and generally does not require collateral. Treasury Stock The Company makes treasury stock purchases in the open market pursuant to the share repurchase program, which was most recently approved by the Board of Directors on November 1, 2019. Treasury stock is recorded on the consolidated balance sheet at cost as a reduction of stockholders’ equity. Shares are released from Treasury at original cost on a first-in, first-out basis, with any gain on the sale reflected as an adjustment to additional paid-in capital. Losses are reflected as an adjustment to additional paid-in capital to the extent of gains previously recognized, otherwise as an adjustment to retained earnings or accumulated deficit. Foreign Currency Translation The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the end of the reporting period. Revenue and expense items are translated at average exchange rates for the reporting period. Resulting translation adjustments are included in the accompanying statement of comprehensive income and accompanying statement of stockholders’ equity as a component of Accumulated Other Comprehensive Loss The functional currency of the Company and its subsidiaries is the respective local currency. The Company has contracts denominated in foreign currencies and therefore, a portion of the Company’s revenues are subject to foreign currency risks. Transactional currency gains and losses that arise from transactions denominated in currencies other than the functional currencies of our operations are recorded in Foreign Currency Translation Fair Value of Financial Instruments The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximate fair value. Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would consist of measurements primarily to goodwill, intangible assets and other long-lived assets, and assets acquired and liabilities assumed in a business combination. 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: ● ● ● During 2020, there were no transfers of our financial assets between Level 1, Level 2, or Level 3 measures. Our financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables summarize assets and liabilities measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements December 31, 2020 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 17 $ — $ — $ 17 Total $ 17 $ — $ — $ 17 Liabilities: Contingent consideration (1) $ — $ — $ 5,319 $ 5,319 $ — $ — $ 5,319 $ 5,319 Basis of Fair Value Measurements December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 17 $ — $ — $ 17 Total $ 17 $ — $ — $ 17 Liabilities: Contingent consideration (1) $ — $ — $ — $ — $ — $ — $ — $ — (1) The current and noncurrent Contingent consideration is included in “Accrued expenses” and “Other current liabilities,” 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 of 2.50% . The following table represents the change in the contingent consideration liability during the years ended December 31, 2020 and 2019: Year Ended December 31, 2020 2019 Beginning Balance $ — $ 1,703 Neuralify contingent consideration accrued 4,900 — Payment of contingent consideration — (1,730) Accretion of contingent consideration 419 30 Unrealized gain (loss) related to currency translation — (3) Ending Balance $ 5,319 $ — The Company’s financial instruments include outstanding borrowings of $78.8 million at December 31, 2020 and $86.9 million at December 31, 2019, which are carried at amortized cost. The effective interest rate of the outstanding borrowings was 2.5% and 5.2% at December 31, 2020 and December 31, 2019, respectively. 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 $77.7 million and $86.7 million at December 31, 2020 and 2019, 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 2.39% to 2.49% . 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. Income Taxes We use the asset and liability method to account for income taxes, including recognition of deferred tax assets and liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. We review our deferred tax assets for recovery. A valuation allowance is established when we believe that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation allowance from period to period are included in our tax provision in the period of change. For uncertain tax positions, we use the prescribed model for assessing the financial recognition and measurement of all tax positions taken or expected to be taken in tax returns. This guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest. Recently Issued Accounting Pronouncements In June 2016, the FASB issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses and additional disclosures. As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements. |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2020 | |
REVENUE | |
REVENUE | NOTE 3—REVENUE The majority of our revenue is derived from contracts that can span from a few months to several years. We enter into contracts that can include various combinations of services, which, depending on contract type, are sometimes capable of being distinct. If services are determined to be distinct, they are accounted for as separate performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct. For contracts with multiple performance obligations, including our managed service (GovernX) implementation, software and implementation, and research and subscription contracts, the Company allocates the transaction price to each performance obligation using our best estimate of the standalone selling price, or SSP, of each distinct good or service in the contract. Our contracts may include promises to transfer multiple services and products to a client. Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require judgment. Estimates were required to determine the SSP for each distinct performance obligation identified within our managed service (including GovernX) implementation contracts, software and implementation contracts, and research and subscription contracts. Contract Balances The timing of revenue recognition, billings, and cash collections results in billed accounts receivables, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities). Our clients are billed based on the type of arrangement. A portion of our services is billed monthly based on hourly or daily rates. There are also client engagements in which we bill a fixed amount for our services. This may be one single amount covering the whole engagement or several amounts for various phases, functions, or milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits before revenue is recognized, resulting in contract liabilities. Contract assets and liabilities are generally reported in the current assets and current liabilities sections of the consolidated balance sheet, at the end of each reporting period, based on the timing of the satisfaction of the related performance obligation(s). For multi-year software sales with annual invoicing, we perform a significant financing component calculation and recognize the associated interest income throughout the duration of the financing period. In addition, we reclassify the resulting contract asset balances as current and noncurrent receivables as receipt of the consideration is conditional only on the passage of time and there are no performance risk factors present. See the table below for a breakdown of contract assets and contract liabilities. December 31, December 31, 2020 2019 Contract assets $ 21,825 $ 28,529 Contract liabilities $ 5,121 $ 4,935 Revenue recognized for the year ended December 31, 2019 that was included in the contract liability balance at January 1, 2019 was $5.9 million and represented primarily revenue from our software and implementation contracts, managed services contracts, and research contracts. Revenue recognized for the year ended December 31, 2020 that was included in the contract liability balance at January 1, 2020 was $4.6 million and represented primarily revenue from our software and implementation contracts, managed services contracts, and research contracts. Remaining performance obligations As of December 31, 2020, the Company had $93.2 million of remaining performance obligations, the majority of which are expected to be satisfied within the next year. |
ACQUISITION
ACQUISITION | 12 Months Ended |
Dec. 31, 2020 | |
ACQUISITION | |
ACQUISITION | NOTE 4 — ACQUISITION Neuralify Acquisition On July 8, 2020, a subsidiary of the Company executed an Asset Purchase Agreement with Neuralify, LLC (“the Agreement”), a firm focused on intelligent automation enablement solutions and services, and consummated the acquisition of substantially all of the assets and assumed certain liabilities of Neuralify, LLC. The primary reason for the acquisition was to expand the capabilities of ISG’s pure-play automation service line, ISG Automation. The purchase price was comprised of $2.3 million of cash consideration paid at closing and certain former employees of Neuralify, LLC will also have the right to receive additional consideration paid via earn-out payments during the next 18 months , if certain financial targets are met. At the Agreement date, the Company estimated such earn-out payments would be up to $4.9 million. The following table summarizes the consideration transferred to acquire Neuralify, LLC and the amounts of identified assets acquired, and liabilities assumed as of the Agreement date: Cash $ 2,282 Contingent consideration 4,900 Total allocable purchase price $ 7,182 The primary factors that drove the goodwill recognized, the majority of which is deductible for tax purposes, are the inclusion of legacy Neuralify workforce and know-how which expands the Company’s pure-play automation service line, ISG Automation. Costs associated with this acquisition are included in the selling, general and administrative expenses in the Consolidated Statement of Income and Comprehensive Income and totaled $0.1 million during the year ended December 31, 2020. This business combination was accounted for under the acquisition method of accounting, and as such, the aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed based on estimated fair values as of the closing date. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows: Accounts receivable $ 226 Contract assets 1 Intangible assets 1,970 Accounts payable (79) Contract liabilities (280) Net assets acquired $ 1,838 Goodwill $ 5,344 The Consolidated Statement of Income and Comprehensive Income includes the results of the Neuralify acquisition subsequent to the closing. Had the acquisition occurred as of January 1, 2019, the impact on the Company’s results of operations would not have been material. |
NET INCOME PER COMMON SHARE
NET INCOME PER COMMON SHARE | 12 Months Ended |
Dec. 31, 2020 | |
NET INCOME PER COMMON SHARE | |
NET INCOME PER COMMON SHARE | NOTE 5—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. The following tables set forth the computation of basic and diluted earnings per share: Years Ended December 31, 2020 2019 Basic: Net income $ 2,755 $ 3,341 Weighted average common shares 47,717 46,917 Earnings per share $ 0.06 $ 0.07 Diluted: Net income $ 2,755 $ 3,341 Basic weighted average common shares 47,717 46,917 Potential common shares 2,255 703 Diluted weighted average common shares 49,972 47,620 Diluted earnings per share $ 0.06 $ 0.07 |
ACCOUNTS RECEIVABLE AND CONTRAC
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS | 12 Months Ended |
Dec. 31, 2020 | |
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS | |
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS | NOTE 6—ACCOUNTS RECEIVABLE AND CONTRACT ASSETS Accounts receivable and contract assets, net of valuation allowance, consisted of the following: Years Ended December 31, 2020 2019 Accounts receivable $ 45,499 $ 48,416 Contract assets 21,825 28,529 Receivables from related parties 149 131 $ 67,473 $ 77,076 |
FURNITURE, FIXTURES AND EQUIPME
FURNITURE, FIXTURES AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2020 | |
FURNITURE, FIXTURES AND EQUIPMENT | |
FURNITURE, FIXTURES AND EQUIPMENT | NOTE 7—FURNITURE, FIXTURES AND EQUIPMENT Furniture, fixtures and equipment consisted of the following: Estimated Years Ended December 31, Useful Lives 2020 2019 Computer hardware, software and other office equipment 2 to 5 years $ 5,238 $ 5,037 Furniture, fixtures and leasehold improvements 2 to 5 years 4,797 4,742 Software and development costs 3 to 5 years 8,385 8,092 Accumulated depreciation (13,419) (11,857) $ 5,001 $ 6,014 Depreciation expense was $2.7 million for both the years ended December 31, 2020 and 2019. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2020 | |
LEASES | |
LEASES | NOTE 8—LEASES In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases” (Topic 842) (“ASC 842”). ASC 842 requires companies to recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. We adopted ASC 842 using the effective date of January 1, 2019 as the date of our initial application of the standard. Consequently, financial information for the comparative periods will not be updated. The Company determines if a contract is, or contains, a lease at contract inception. The Company elected the package of practical expedients for leases that commenced prior to January 1, 2019 and will not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. The Company elected upon adoption the use of hindsight in assessing factors that impact determination of the lease term, such as the likelihood that any renewal or purchase options are exercised. The Company elected to make an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. The Company also elected not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. The Company recognizes those lease payments in the consolidated statements of income on a straight-line basis over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. The Company leases its office space and office equipment under long-term operating lease agreements which expire at various dates through September 2026, some of which include options to extend the leases for up to 3 years , and some of which included options to terminate the leases within 1 year. Under the operating leases, the Company pays certain operating expenses relating to the office equipment and leased property. The components of lease expense were as follows: Years Ended December 31, 2020 2019 Lease cost Operating lease cost $ 2,541 $ 2,935 Finance lease cost: Amortization of right-of-use assets 53 15 Interest on lease liabilities 5 3 Short-term lease cost 41 30 Variable lease cost 304 319 Sublease income (245) (243) Total lease cost $ 2,699 $ 3,059 Supplemental cash flow information related to leases was as follows Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 53 $ 13 Operating cash flows from operating leases $ 3,284 $ 3,412 Financing cash flows from finance leases $ 6 $ 10 Supplemental balance sheet information related to leases was as follows: (In thousands, except lease term and discount rate) Years Ended December 31, 2020 2019 Operating leases Operating lease right-of-use assets $ 5,909 $ 6,572 Current operating lease liabilities (1) $ 2,550 3,013 Non-current operating lease liabilities 4,332 5,013 Total operating lease liabilities $ 6,882 $ 8,026 Finance leases Finance lease right-of-use assets $ 197 $ 76 Current finance lease liabilities (1) $ 95 38 Non-current finance lease liabilities 101 36 Total finance lease liabilities $ 196 $ 74 Weighted average remaining lease term (in years) Operating leases 3.6 4.2 Finance leases 2.6 2.1 Weighted average discount rate Operating leases 7.1% 7.7% Finance leases 4.4% 7.9% (1) Current lease liabilities are included in “Accrued expenses and other current liabilities.” Maturities of lease liabilities were as follows: Operating Finance Leases Leases Year Ending December 31, 2021 $ 2,643 $ 97 2022 2,123 73 2023 1,255 12 2024 981 12 2025 762 9 Thereafter 85 — Total lease payments 7,849 203 Less imputed interest (967) (7) Total 6,882 196 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2020 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 9—INTANGIBLE ASSETS The carrying amount of intangible assets, net of accumulated amortization and impairment charges, as of December 31, 2020 and 2019 consisted of the following: 2020 Gross Estimated Carrying Accumulated Currency Net Book Useful Lives Amount Acquisitions Amortization impact Value Amortizable intangibles: Customer relationships 2 to 15 years $ 73,723 $ 1,560 $ (66,705) $ (108) $ 8,470 Noncompete agreements 4 to 7 years 5,952 10 (5,911) — 51 Software 3 to 4 years 1,500 160 (1,511) — 149 Backlog 1 to 2 years 5,002 — (4,981) (21) — Databases 4 to 15 years 13,218 — (6,852) (172) 6,194 Trademark and trade names 5 years 1,250 240 (1,290) — 200 Intangibles $ 100,645 $ 1,970 $ (87,250) $ (301) $ 15,064 2019 Gross Estimated Carrying Accumulated Currency Net Book Useful Lives Amount Acquisitions Amortization impact Value Amortizable intangibles: Customer relationships 2 to 15 years $ 73,723 $ — $ (63,761) $ (116) $ 9,846 Noncompete agreements 4 to 7 years 5,952 — (5,862) 1 91 Software 3 to 4 years 1,500 — (1,500) — — Backlog 1 to 2 years 5,002 — (4,981) (21) — Databases 4 to 15 years 13,218 — (6,364) (186) 6,668 Trademark and trade names 5 years 1,250 — (1,250) — — Intangibles $ 100,645 $ — $ (83,718) $ (322) $ 16,605 Amortization expense was $3.5 million and $4.0 million for the years ended December 31, 2020 and 2019, respectively. The estimated future amortization expense subsequent to December 31, 2020, is as follows: 2021 $ 2,642 2022 2,110 2023 1,814 2024 1,495 2025 1,326 Thereafter 5,677 $ 15,064 |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2020 | |
GOODWILL | |
GOODWILL | NOTE 10—GOODWILL The changes in the carrying amount of goodwill for the year ended December 31, 2020 and 2019 are as follows: 2020 2019 Balance as of January 1 Goodwill $ 85,786 $ 85,786 Foreign currency impact (437) (397) Net balance as of January 1 85,349 85,389 Acquisitions 5,344 — Foreign currency impact and adjustments 315 (40) 5,659 (40) Balance as of December 31 Goodwill 91,130 85,786 Foreign currency impact and adjustments (122) (437) Net balance as of December 31 $ 91,008 $ 85,349 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2020 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 11—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES The components of accrued liabilities at December 31, 2020 and 2019 are as follows: December 31, 2020 2019 Accrued payroll, incentive, and vacation $ 11,630 $ 3,417 Accrued corporate and payroll related taxes 5,459 4,264 Contingent consideration—current 2,929 — Current operating lease liability 2,550 3,013 Other 7,496 5,760 $ 30,064 $ 16,454 |
FINANCING ARRANGEMENTS AND LONG
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | 12 Months Ended |
Dec. 31, 2020 | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | NOTE 12—FINANCING ARRANGEMENTS AND LONG-TERM DEBT Long-term debt consists of the following: December 31, 2020 2019 Senior secured credit facility $ 78,775 $ 86,863 Debt issuance costs (924) (1,040) 77,851 85,823 Less current installments on long term debt 4,300 11,000 Long-term debt $ 73,551 $ 74,823 Aggregate annual maturities of debt obligations by calendar year, are as follows: Debt 2021 $ 4,300 2022 4,300 2023 4,300 2024 4,300 2025 61,575 $ 78,775 On March 10, 2020, the Company amended and restated its senior secured credit facility to include a $86.0 million term facility and to increase the revolving commitments per the revolving facility (the “2020 Credit Agreement”) from $30.0 million to $54.0 million. The material terms under the 2020 Credit Agreement are as follows: ● Each of the term loan facility and revolving credit facility has a maturity date of March 10, 2025 (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. ● The term loan is repayable in nineteen consecutive quarterly installments of $1,075,000 each that commenced on June 30, 2020 and a final payment of the 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), transactions with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Company is required to comply with a 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. The Company’s financial statements include outstanding borrowings of $78.8 million and $86.9 million at December 31, 2020 and December 31, 2019, respectively, which are carried at amortized cost. The effective interest rate of the outstanding borrowings was 2.5% and 5.2% at December 31, 2020 and December 31, 2019, respectively. 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 $77.7 million and $86.7 million at December 31, 2020 and December 31, 2019, 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 is 2.49% . 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 13—COMMITMENTS AND CONTINGENCIES The Company is subject to contingencies which arise through the ordinary course of business. All material liabilities of which management is aware are properly reflected in the financial statements at December 31, 2020 and 2019. Neuralify Contingent Consideration As of December 31, 2020, the Company has recorded a liability of $5.3 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, of which $2.9 is classified as current and included in accrued expenses on the consolidated balance sheet. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2020 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 14—RELATED PARTY TRANSACTIONS From time to time, the Company may have receivables and payables with employees and shareholders. The Company had outstanding receivables from related parties, including shareholders, totaling $0.1 million for both December 31, 2020 and 2019, and no outstanding payables. These transactions related to personal withholding taxes paid on behalf of expatriate employees. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2020 | |
INCOME TAXES | |
INCOME TAXES | NOTE 15—INCOME TAXES The components of income before income taxes for the years ended December 31, 2020 and 2019 consists of the following: Years Ended December 31, 2020 2019 Domestic $ (3,361) $ 1,206 Foreign 9,229 5,933 Total income before income taxes $ 5,868 $ 7,139 The components of the 2020 and 2019 income tax provision are as follows: Years Ended December 31, 2020 2019 Current: Federal $ (1,368) $ (327) State 564 603 Foreign 3,088 2,431 Total current provision 2,284 2,707 Deferred: Federal 365 (123) State (68) (140) Foreign 532 1,354 Total deferred benefit 829 1,091 Total $ 3,113 $ 3,798 The differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate of 21% for both years ended December 31, 2020 and 2019 were as follows: Years Ended December 31, 2020 2019 Tax provision computed at 21% $ 1,232 $ 1,499 Nondeductible expenses 718 521 State income taxes, net of federal benefit 400 327 Tax impact of foreign operations 339 1,347 Valuation allowances increase (release) 517 (141) Net increase (decrease) of uncertain tax positions (34) (34) Other (59) 279 Income tax provision $ 3,113 $ 3,798 Effective income tax rates 53.1 % 53.2 % The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows: December 31, 2020 2019 Noncurrent deferred tax asset Compensation related expenses $ 2,081 $ 2,279 Foreign currency translation 1,697 2,458 U.S. foreign tax credit carryovers 1,194 879 Foreign net operating loss carryovers 4,943 5,563 Accruals and reserves 1,026 1,404 Operating lease right-of-use assets 1,396 2,034 Other 405 224 Valuation allowance for deferred tax assets (3,707) (3,989) Total noncurrent deferred tax asset 9,035 10,852 Noncurrent deferred tax liability Depreciable assets (699) (510) Prepaids (428) (514) Intangible assets (911) (1,177) Investment in foreign subsidiaries (3,664) (3,323) Foreign earnings distribution taxes (851) (1,741) Foreign intangibles and reserves (2,888) (1,754) Operating lease liabilities (1,160) (1,716) Total noncurrent deferred tax liability (10,601) (10,735) Net noncurrent deferred tax (liability) asset (1,566) 117 Net deferred tax (liability) asset $ (1,566) $ 117 A valuation allowance was established at December 31, 2020 and 2019 due to estimates of future utilization of net operating loss carryovers in the U.S. and certain foreign jurisdictions, derived primarily from acquisitions and recorded through purchase accounting. The valuation allowance at December 31, 2020 and 2019 also includes a full valuation for the Company’s foreign tax credit carryovers and foreign taxes on its controlled foreign corporations. As of December 31, 2020, the Company has foreign net operating loss (NOL) carryforwards of approximately $14.3 million. If not utilized, these NOL carryforwards begin to expire in 2021. The Company also has a federal tax credit carryforward of approximately $1.2 million, which will begin to expire in 2026, if not utilized. Uncertain tax positions Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. It is the Company’s policy to accrue for interest and penalties related to its uncertain tax positions within income tax expense. A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows: December 31, 2020 2019 Balance, beginning of year $ 1,534 $ 1,475 Additions as a result of tax positions taken during the current period 69 90 Reductions as a result of tax positions taken during a prior period (34) — Reductions as a result of lapse of statute — (31) Balance, end of year $ 1,569 $ 1,534 We do not expect our unrecognized tax benefits to significantly change in the next twelve months. The Company has recognized through income tax expense approximately $0.9 million of interest and penalties related to uncertain tax positions. The amount of unrecognized tax benefit, if recognized, that would impact the effective tax rate is $1.6 million. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2013. |
STOCK BASED COMPENSATION PLANS
STOCK BASED COMPENSATION PLANS | 12 Months Ended |
Dec. 31, 2020 | |
STOCK BASED COMPENSATION PLANS | |
STOCK BASED COMPENSATION PLANS | NOTE 16—STOCK-BASED COMPENSATION PLANS The Amended and Restated 2007 Equity and Incentive Award Plan (“Incentive Plan”) and Amended and Restated 2007 Employee Stock Purchase Plan (“ESPP”) were approved by the Company’s stockholders at our 2014 annual meeting with a subsequent amendment to the Incentive Plan approved by the Company’s stockholders at our 2017 annual meeting as discussed below. Subject to the terms of the Incentive Plan, the Incentive Plan authorizes the grant of awards, which awards may be made in the form of (i) nonqualified stock options; (ii) stock options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code (stock options described in clause (i) and (ii), “options”); (iii) stock appreciation rights (“SARs”); (iv) restricted stock and/or restricted stock units; (v) other stock based awards; (vi) performance-based awards, which are equity awards or incentive awards intended to qualify for full tax deductibility by the company under Code Section 162 (m); and (vii) incentive awards, a cash-denominated award earnable by achievement of performance goals. The issuance of shares or the payment of cash upon the exercise of an award or in consideration of the cancellation or termination of an award shall reduce the total number of shares available under the Incentive Plan, as applicable. The provisions of each award will vary based on the type of award granted and will be specified by the Compensation Committee of the Board of Directors. Those awards which are based on a specific contractual term will be granted with a term not to exceed ten years . The SARs granted under the Incentive Plan are granted with an exercise price equal to the fair market value of the Common Shares at the time the SARs are granted. At the 2020 Annual Meeting, our stockholders approved an amendment to the Incentive Plan to increase the number of shares of common stock available for issuance under the Incentive Plan by 5,500,000 shares (the “Incentive Plan Amendment”). As of December 31, 2020, there were 3,455,800 and 1,161,220 shares available for grant under the amended and restated Incentive Plan and ESPP, respectively. The Company recognized $8.9 million and $9.6 million in employee stock-based compensation expense during the years ended December 31, 2020 and 2019, respectively. This expense was recorded in selling, general and administrative in the consolidated statement of comprehensive income. Restricted Share Awards/Units The Incentive Plan provides for the granting of restricted share units (“RSU”), the vesting of which is subject to conditions and limitations established at the time of the grant. Recipients of RSU awards will not have the rights of a shareholder of the Company until such date as the Common Shares are issued or transferred to the recipient. If the employee retires (at the normal retirement age stated in the applicable retirement plan or applicable law, if there is a mandatory retirement age), the restricted shares continue to vest on the same schedule as if the employee remained employed with the Company. Upon a termination of employment due to an employee’s death or permanent disability, the restricted shares become 100% vested. Dividends accrue and will be paid if and when the restricted shares vest. The Company also granted RSUs to specific employees which have the following characteristics: ● Performance-Based RSU Vesting (Stock Price): ● Time-Based RSU Vesting: If an employee’s employment is terminated (i) at any time during the vesting period due to the employee’s death, disability or retirement prior to the applicable vesting date or (ii) without cause by the Company after 50% of the relevant period has elapsed, then the RSUs will vest pro rata based on the period of time worked relative to such period. However, no shares will be distributed until the applicable pro rata vesting date (and, in the case of the Performance-Based RSUs, only if and to the extent that the performance target is achieved). In all other terminations occurring prior to the applicable vesting date, the RSUs will expire. Pursuant to the terms of the Incentive Plan, in the event of a change in control, the Compensation Committee of the Board of Directors may accelerate vesting of the outstanding awards of RSUs then held by participants. All RSUs will be payable in shares of the Company’s common stock immediately upon vesting. No dividend equivalents will be paid with respect to any RSUs. As part of the Incentive Plan Amendment, dividends/dividend equivalents may be paid or credited on other stock-based awards (such as restricted stock units), but those dividends/dividend equivalents must be subject to the same vesting (or more stringent vesting) than the vesting applicable to the underlying awards. The fair value of RSUs is determined based on the closing price of the Company’s shares on the grant date. The total fair value is amortized to expense on a straight-line basis over the vesting period. A summary of the status of the Company’s RSUs issued under its Incentive Plan as of December 31, 2020 and changes during the years then ended, is presented below: Weighted- Average Grant Date RSU Fair Value Non-vested at December 31, 2018 4,757 $ 3.98 Granted 3,838 $ 2.93 Vested (2,564) $ 3.94 Forfeited (456) $ 4.08 Non-vested at December 31, 2019 5,575 $ 3.22 Granted 4,249 $ 2.01 Vested (2,634) $ 3.68 Forfeited (324) $ 3.00 Non-vested at December 31, 2020 6,866 $ 2.31 The total fair value of RSUs vested during the years ended December 31, 2020 and 2019 was $9.7 million and $10.1 million, respectively. As of December 31, 2020, there was $8.8 million of unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 2.1 years. Employee Stock Purchase Plan The Company uses the Black-Scholes option pricing model to estimate the fair value of shares expected to be issued under the Company’s employee stock purchase plan. The ESPP provides that a total of 3.6 million shares of Common Stock are reserved for issuance under the plan. The ESPP, which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code, is implemented utilizing three -month offerings with purchases occurring at three -month intervals. The ESPP administration is overseen by the Company’s Compensation Committee. Employees are eligible to participate if they are employed by the Company for at least 20 hours per week and more than five months in a calendar year. The ESPP permits eligible employees to purchase Common Stock through payroll deductions, ranging from one to ten percent of their eligible earnings subject to IRS regulated cap of $25,000 . The price of Common Stock purchased under the ESPP is 90% of the fair market value of the Common Stock on the applicable purchase date. Employees may end their participation in an offering at any time during the offering period, and participation ends automatically upon termination of employment. The Compensation Committee may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP. The Company may issue new shares for the ESPP using treasury shares or newly issued shares. For the year ended December 31, 2020, the Company issued 237,726 shares for the ESPP. There were 1,161,220 shares available for purchase at December 31, 2020 under the ESPP. |
SEGMENT AND GEOGRAPHICAL INFORM
SEGMENT AND GEOGRAPHICAL INFORMATION | 12 Months Ended |
Dec. 31, 2020 | |
SEGMENT AND GEOGRAPHICAL INFORMATION | |
SEGMENT AND GEOGRAPHICAL INFORMATION | NOTE 17—SEGMENT AND GEOGRAPHICAL INFORMATION The Company operates in one segment, fact-based sourcing advisory services. The Company operates principally in the Americas, Europe, and Asia Pacific. The Company’s foreign operations are subject to local government regulations and to the economic and political uncertainties of those areas. Geographical information for the segment is as follows: Years Ended December 31, 2020 2019 Revenues Americas (1) $ 141,227 $ 156,075 Europe (2) 87,131 90,739 Asia Pacific (3) 20,770 18,949 $ 249,128 $ 265,763 Fixed assets Americas $ 3,114 $ 4,356 Europe 1,709 1,555 Asia Pacific 178 103 $ 5,001 $ 6,014 (1) Substantially all relates to operations in the United States. (2) Includes revenues from operations in Germany of $43.5 million and $44.4 million in 2020 and 2019, respectively. Includes revenues from operations in the United Kingdom of $19.0 million and $17.2 million in 2020 and 2019, respectively. (3) Includes revenues from operations in Australia of $16.9 million and $15.5 million in 2020 and 2019, respectively. 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 or any other measure or metric, other than consolidated, for the purposes of making operating decisions or allocating resources. |
RISKS AND UNCERTAINTIES
RISKS AND UNCERTAINTIES | 12 Months Ended |
Dec. 31, 2020 | |
RISKS AND UNCERTAINTIES | |
RISKS AND UNCERTAINTIES | NOTE 18—RISKS AND UNCERTAINTIES On March 11, 2020, the World Health Organization declared the coronavirus (COVID-19) a pandemic, following the rapid spread of the disease from where it was first diagnosed, in China, to nations worldwide. The outbreak sparked responses across countries, states and cities worldwide to enforce various measures of social distancing and shelter-in-place orders and temporary closure of non-essential businesses to reduce further transmission of the virus. As a result of these measures, the US and global markets have seen significant disruption, the extent and duration of which remains highly uncertain. The impact of COVID-19 pandemic continues to evolve and, therefore, the Company cannot predict with certainty the extent to which the pandemic will negatively impact our results of operations, cash flows and financial position, liquidity and ability to remain in compliance with our financial covenants. In 2020, the Company experienced a year-over-year revenue decline. Given the uncertainty of the marketplace, the Company has implemented business continuity plans to ensure that the Company is able to remain fully operational with a remote workforce, conducted financial modeling scenarios in order to ensure prudent cost containment, and has proactively implemented a series of cash conservation measures. These measures include actions taken in the second, third, and fourth quarters of 2020 to reduce personnel costs and other operating expenses, including reductions in staffing and contractor levels, vendor spending, travel, and other measures. The Company has financial covenants underlying its debt which require an adjusted Debt to EBITDA ratio of 3.25. In light of the pandemic, there is uncertainty regarding the marketplace demand for the Company’s services and thus the Company’s future revenue generation. Accordingly, in light of this uncertainty, the Company has developed plans to further reduce operating expenses to the extent more prolonged revenue shortfalls are experienced which would prevent the Company from complying with its financial covenants. Management's plans would allow the Company to generate sufficient cash flows to reduce the Company's outstanding net debt and enable the Company to comply with the terms of its debt arrangements. Accordingly, the Company believes that based upon current facts and circumstances, its existing cash coupled with the cash flows generated from operations will be sufficient to meet its cash needs for 12 months from the date of issuance of these financial statements. |
RESTRUCTURING CHARGES
RESTRUCTURING CHARGES | 12 Months Ended |
Dec. 31, 2020 | |
RESTRUCTURING CHARGES | |
RESTRUCTURING CHARGES | NOTE 19 — RESTRUCTURING CHARGES 2020 Restructuring Plan In the third and fourth quarters of 2020, the Company took restructuring actions to lower our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business (the “Restructuring Plan”). Most of these actions are based on our recent experience and learning in the COVID-19 pandemic and a resulting review of our operations, which continues to address certain operating expenses such as occupancy expense and salaries and related expenses. A summary of the activity affecting the Company's accrued contractual termination benefit liability for the year ended December 31, 2020 is as follows: Restructuring Plan Balance at January 1, 2020 $ — Amounts accrued 2,349 Amounts paid/incurred (1,592) Balance at December 31, 2020 $ 757 The $2.3 million of net restructuring charges was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses. We expect that the remaining actions of the Restructuring Plan will be completed over the next three months . |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2020 | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | INFORMATION SERVICES GROUP, INC. SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (in thousands) Balance at Charges to Balance at Beginning Costs and Additions/ End of Description of Period Expenses (Deductions) Period Year ended December 31, 2020 Allowance for doubtful accounts $ 343 817 (792) $ 368 Allowance for tax valuation $ 3,989 517 (799) $ 3,707 Year ended December 31, 2019 Allowance for doubtful accounts $ 401 75 (133) $ 343 Allowance for tax valuation $ 4,209 (141) (79) $ 3,989 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. These consolidated financial statements and footnotes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, references to the Company include ISG and its consolidated subsidiaries. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP 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 revenue recognition guidance for contracts in which control is transferred to the customer over time affect the amounts of revenues, expenses, contract assets and contract liabilities. 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 and definite lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation, and the valuation of stock-based compensation. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Any future asset impairment charges, increase in allowance for doubtful accounts, or restructuring charges could be more likely if the negative effects of the COVID-19 pandemic continue and will be dependent on the severity and duration of this crisis. To date, the Company has not observed any material impairments of its assets or a significant change in the fair value of assets due to the COVID-19 pandemic. |
Business Combinations | Business Combinations We have acquired businesses critical to the Company’s long-term growth strategy. Results of operations for acquisitions are included in the accompanying consolidated statement of comprehensive income from the date of acquisition. Acquisitions are accounted for using the purchase method of accounting and the purchase price is allocated to the net assets acquired based upon their estimated fair values at the date of acquisition. The excess of the purchase price over the net assets was recorded as goodwill. Acquisition-related costs are expensed as incurred and recorded in selling, general and administrative expenses. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents, including certain money market accounts. The Company principally maintains its cash in money market and bank deposit accounts in the United States of America which typically exceed applicable insurance limits. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. |
Restricted Cash | Restricted Cash Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes. |
Accounts Receivable, Contract Assets and Allowance for Doubtful Accounts | Accounts Receivable, Contract Assets and Allowance for Doubtful Accounts Our trade receivables primarily consist of amounts due for services already performed. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and historical bad debts. However, our actual experience may vary from these estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision relates to a client’s inability or unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the accompanying consolidated statement of comprehensive income. Historically, the Company’s bad debt reserves and write-offs have not been significant. The provision for unbilled services is recorded as a reduction to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. Historically, the Company’s unbilled receivable reserves and write-offs have not been significant. |
Prepaid Expenses and Other Assets | Prepaid Expenses and Other Assets Prepaid expenses and other assets consist primarily of prepaid expenses for insurance, conferences and deposits for facilities, programs and promotion items. |
Furniture, Fixtures and Equipment, net | Furniture, Fixtures and Equipment, net Furniture, fixtures and equipment is recorded at cost. Depreciation is computed by applying the straight-line method over the estimated useful life of the assets, which ranges from three to five years . Leasehold improvements are depreciated over the lesser of the useful life of the underlying asset or the lease term, which generally ranges from three to five years . Expenditures for renewals and betterments are capitalized. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any associated gain or loss thereon is reflected in the accompanying consolidated statement of comprehensive income. The Company capitalizes internal-use software and website development costs and records these amounts within Furniture, Fixtures and Equipment, net. Accounting standards require that certain costs related to the development or purchase of internal-use software and systems as well as the costs incurred in the application development stage related to its website be capitalized and amortized over the estimated useful life of the software or system. They also require that costs related to the preliminary project stage, data conversion and post implementation/operation stage of an internal-use software development project be expensed as incurred. During the years ended December 31, 2020 and 2019, the Company capitalized $0.3 million and $0.6 million, respectively, of costs associated with system and website development. |
Goodwill | Goodwill Our goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by us during our fourth fiscal quarter or more frequently if we believe impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not the fair value of the reporting unit is less than its carrying amount. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value then goodwill is tested further for impairment. If the fair value of goodwill is lower than its carrying amount, an impairment loss is recognized in an amount equal to the difference. Subsequent increases in value are not recognized in the financial statements. There was no impairment of goodwill during the years ended December 31, 2020 and 2019, nor were any indicators identified in 2020 or 2019 that would suggest that it is more likely than not that the Company’s reporting unit is impaired. |
Long-Lived Assets | Long-Lived Assets Long lived assets, excluding goodwill and indefinite lived intangibles, to be held and used by the Company are reviewed to determine whether any significant change in the long-lived asset’s physical condition, a change in industry conditions or a reduction in cash flows associated with the asset group that contains the long-lived asset. If these or other factors indicate the carrying amount of the asset group, which is the lowest level for which identifiable cash flows exist that are separately identifiable from other cash flows, may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset group. The fair value of the asset group is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows. Cash flows are generally discounted at an interest rate commensurate with our weighted average cost of capital. Assets are classified as held for sale when the Company has a plan for disposal of certain assets and those assets meet the held for sale criteria. |
Debt Issuance Costs | Debt Issuance Costs Costs directly incurred in obtaining long-term financing, typically bank and attorney fees, are deferred and are amortized over the life of the related loan. Deferred issuance costs are classified as a direct deduction to the long-term debt in the accompanying consolidated balance sheet. Amortization of debt issuance costs is included in interest expense and totaled $0.4 million and $0.6 million for the years ended December 31, 2020 and 2019, respectively. |
Revenue Recognition | Revenue Recognition We recognize our revenues by applying the following five steps: (1) identify the contract with the customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligation(s); and (5) recognize revenue when (or as) the company satisfies the performance obligation(s). We principally derive revenues from fees for services generated on a project by project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is our policy to obtain written agreements from clients prior to performing services or when evidence of enforceable rights and obligations is obtained. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee structure. Revenues for time and materials contracts, which may include capped fees or “not-to-exceed” clauses, are recognized based on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project. For contract with capped fees or not-to-exceed clauses, we monitor our performance and fees billed to ensure that revenue is not recognized in excess of the contractually capped fee. Revenues related to fixed fee contracts are recognized as value is delivered to the customer, consistent with the transfer of control to the customer over time. Revenue for these contracts is recognized proportionally over the term of the contract using an input method based on the proportion of labor hours incurred as compared to the total estimated labor hours for the fixed fee contract performance obligations, which we consider the best available indicator of the pattern and timing in which contract performance obligations are fulfilled and control transfers to the customer. This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for reimbursable expenses. There are situations where the number of hours to complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen events. The results of any revisions in these estimates are reflected in the period in which they become known. For managed service implementation contracts, revenue is recognized over time as a percentage of hours incurred to date as compared to the total expected hours of the implementation, consistent with the transfer of control to the customer. For ongoing managed services contract, revenue is recognized over time, consistent with the weekly or monthly fee specified within such arrangements. We also derive revenues based on negotiating reductions in network costs of companies with the entity’s related service providers and providing other services such as audits of network and communication expenses, and consultation for network architecture. These contracts can be fixed in fees or can be based on the level of savings achieved related to its communications costs. Additionally, these contracts can also have a fixed component and a contingent component that is based on the savings generated by the Company. For network contingency contracts with termination for convenience clauses, revenue is recognized over time due to the existence of provisions for payment for progress incurred to date plus a reasonable profit margin. The contract periods range from a few months to in excess of a year. We also enter into arrangements for the sale of robotics software licenses and related delivery of consulting or implementation services at the same time or within close proximity to one another. Such software-related performance obligations include the sale of software licenses and other software-related services. For software and implementation contracts, revenue associated with the software performance obligation is recognized at the point at which the software is installed, while revenue associated with the implementation service performance obligation is recognized over the software implementation period as a percentage of hours incurred to date as compared to the total expected hours. Revenue associated with events is recognized at the point of time at which the event occurs. Conversely, revenue associated with research subscriptions is recognized over time, as the customer accesses our data or related platforms. The agreements entered into in connection with a project typically allow our clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by us through the effective date of the termination. In addition, from time to time, we enter into agreements with clients that limit our right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit us from performing a defined range of services that we might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team. When we recognize revenues in advance of billing, those revenues are recorded as contract assets. When we receive cash in advance of completing services or earning revenues, those amounts are recorded as contract liabilities. |
Reimbursable Expenditures | Reimbursable Expenditures Amounts billed to customers for reimbursable expenditures are included in revenues and the associated costs incurred by the Company are included in direct costs and expenses for advisors in the accompanying consolidated statement of comprehensive income. Non-reimbursable amounts are expensed as incurred. Reimbursable expenditures totaled $1.7 million and $9.6 million for the years ended December 31, 2020 and 2019, respectively. The decrease was attributable to pandemic related travel restrictions that occurred throughout the majority of 2020. |
Direct Costs and Expenses for Advisors | Direct Costs and Expenses for Advisors Direct costs and expenses for advisors include payroll expenses and advisory fees directly associated with the generation of revenues and other program expenses. Direct costs and expenses for advisors are expensed as incurred. Direct costs and expenses for advisors also include expense accruals for discretionary bonus payments. Bonus accrual levels are adjusted throughout the year based on actual and projected Company performance. |
Stock-Based Compensation | Stock-Based Compensation We grant restricted stock units with a fair value that is determined based on the closing price of our common stock on the date of grant. Such grants generally vest ratably over a four - year period for employees and a three-year period for directors. Stock-based compensation expense is recognized ratably over the applicable service period. We follow the provisions of accounting and disclosure requirements for share-based payments, including the measurement and recognition of all share-based compensation under the fair value method. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company places its cash investments with high quality financial institutions. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history and generally does not require collateral. |
Treasury Stock | Treasury Stock The Company makes treasury stock purchases in the open market pursuant to the share repurchase program, which was most recently approved by the Board of Directors on November 1, 2019. Treasury stock is recorded on the consolidated balance sheet at cost as a reduction of stockholders’ equity. Shares are released from Treasury at original cost on a first-in, first-out basis, with any gain on the sale reflected as an adjustment to additional paid-in capital. Losses are reflected as an adjustment to additional paid-in capital to the extent of gains previously recognized, otherwise as an adjustment to retained earnings or accumulated deficit. |
Foreign Currency Translation | Foreign Currency Translation The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the end of the reporting period. Revenue and expense items are translated at average exchange rates for the reporting period. Resulting translation adjustments are included in the accompanying statement of comprehensive income and accompanying statement of stockholders’ equity as a component of Accumulated Other Comprehensive Loss The functional currency of the Company and its subsidiaries is the respective local currency. The Company has contracts denominated in foreign currencies and therefore, a portion of the Company’s revenues are subject to foreign currency risks. Transactional currency gains and losses that arise from transactions denominated in currencies other than the functional currencies of our operations are recorded in Foreign Currency Translation |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximate fair value. Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would consist of measurements primarily to goodwill, intangible assets and other long-lived assets, and assets acquired and liabilities assumed in a business combination. 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: ● ● ● During 2020, there were no transfers of our financial assets between Level 1, Level 2, or Level 3 measures. Our financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables summarize assets and liabilities measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements December 31, 2020 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 17 $ — $ — $ 17 Total $ 17 $ — $ — $ 17 Liabilities: Contingent consideration (1) $ — $ — $ 5,319 $ 5,319 $ — $ — $ 5,319 $ 5,319 Basis of Fair Value Measurements December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 17 $ — $ — $ 17 Total $ 17 $ — $ — $ 17 Liabilities: Contingent consideration (1) $ — $ — $ — $ — $ — $ — $ — $ — (1) The current and noncurrent Contingent consideration is included in “Accrued expenses” and “Other current liabilities,” 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 of 2.50% . The following table represents the change in the contingent consideration liability during the years ended December 31, 2020 and 2019: Year Ended December 31, 2020 2019 Beginning Balance $ — $ 1,703 Neuralify contingent consideration accrued 4,900 — Payment of contingent consideration — (1,730) Accretion of contingent consideration 419 30 Unrealized gain (loss) related to currency translation — (3) Ending Balance $ 5,319 $ — The Company’s financial instruments include outstanding borrowings of $78.8 million at December 31, 2020 and $86.9 million at December 31, 2019, which are carried at amortized cost. The effective interest rate of the outstanding borrowings was 2.5% and 5.2% at December 31, 2020 and December 31, 2019, respectively. 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 $77.7 million and $86.7 million at December 31, 2020 and 2019, 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 2.39% to 2.49% . 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. |
Income Taxes | Income Taxes We use the asset and liability method to account for income taxes, including recognition of deferred tax assets and liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. We review our deferred tax assets for recovery. A valuation allowance is established when we believe that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation allowance from period to period are included in our tax provision in the period of change. For uncertain tax positions, we use the prescribed model for assessing the financial recognition and measurement of all tax positions taken or expected to be taken in tax returns. This guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In June 2016, the FASB issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses and additional disclosures. As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of assets measured at fair value on a recurring basis | Basis of Fair Value Measurements December 31, 2020 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 17 $ — $ — $ 17 Total $ 17 $ — $ — $ 17 Liabilities: Contingent consideration (1) $ — $ — $ 5,319 $ 5,319 $ — $ — $ 5,319 $ 5,319 Basis of Fair Value Measurements December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 17 $ — $ — $ 17 Total $ 17 $ — $ — $ 17 Liabilities: Contingent consideration (1) $ — $ — $ — $ — $ — $ — $ — $ — (1) The current and noncurrent Contingent consideration is included in “Accrued expenses” and “Other current liabilities,” respectively. |
Schedule of change in the contingent consideration liability | Year Ended December 31, 2020 2019 Beginning Balance $ — $ 1,703 Neuralify contingent consideration accrued 4,900 — Payment of contingent consideration — (1,730) Accretion of contingent consideration 419 30 Unrealized gain (loss) related to currency translation — (3) Ending Balance $ 5,319 $ — |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
REVENUE | |
Schedule of contract assets and contract liabilities | December 31, December 31, 2020 2019 Contract assets $ 21,825 $ 28,529 Contract liabilities $ 5,121 $ 4,935 |
ACQUISITION (Tables)
ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
ACQUISITION | |
Schedule of consideration transferred and the amounts of identified assets acquired, and liabilities assumed as of the Agreement date | Cash $ 2,282 Contingent consideration 4,900 Total allocable purchase price $ 7,182 |
Schedule of purchase price assigned to intangible assets and the amortization period | Accounts receivable $ 226 Contract assets 1 Intangible assets 1,970 Accounts payable (79) Contract liabilities (280) Net assets acquired $ 1,838 Goodwill $ 5,344 |
NET INCOME PER COMMON SHARE (Ta
NET INCOME PER COMMON SHARE (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
NET INCOME PER COMMON SHARE | |
Schedule of computation of basic and diluted earnings (loss) per share | Years Ended December 31, 2020 2019 Basic: Net income $ 2,755 $ 3,341 Weighted average common shares 47,717 46,917 Earnings per share $ 0.06 $ 0.07 Diluted: Net income $ 2,755 $ 3,341 Basic weighted average common shares 47,717 46,917 Potential common shares 2,255 703 Diluted weighted average common shares 49,972 47,620 Diluted earnings per share $ 0.06 $ 0.07 |
ACCOUNTS RECEIVABLE AND CONTR_2
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS | |
Schedule of accounts receivable and contract assets, net of valuation allowance | Years Ended December 31, 2020 2019 Accounts receivable $ 45,499 $ 48,416 Contract assets 21,825 28,529 Receivables from related parties 149 131 $ 67,473 $ 77,076 |
FURNITURE, FIXTURES AND EQUIP_2
FURNITURE, FIXTURES AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
FURNITURE, FIXTURES AND EQUIPMENT | |
Schedule of furniture, fixtures and equipment | Estimated Years Ended December 31, Useful Lives 2020 2019 Computer hardware, software and other office equipment 2 to 5 years $ 5,238 $ 5,037 Furniture, fixtures and leasehold improvements 2 to 5 years 4,797 4,742 Software and development costs 3 to 5 years 8,385 8,092 Accumulated depreciation (13,419) (11,857) $ 5,001 $ 6,014 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
LEASES | |
Schedule of components of lease expense | Years Ended December 31, 2020 2019 Lease cost Operating lease cost $ 2,541 $ 2,935 Finance lease cost: Amortization of right-of-use assets 53 15 Interest on lease liabilities 5 3 Short-term lease cost 41 30 Variable lease cost 304 319 Sublease income (245) (243) Total lease cost $ 2,699 $ 3,059 Supplemental cash flow information related to leases was as follows Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 53 $ 13 Operating cash flows from operating leases $ 3,284 $ 3,412 Financing cash flows from finance leases $ 6 $ 10 |
Schedule of supplemental balance sheet information related to leases | (In thousands, except lease term and discount rate) Years Ended December 31, 2020 2019 Operating leases Operating lease right-of-use assets $ 5,909 $ 6,572 Current operating lease liabilities (1) $ 2,550 3,013 Non-current operating lease liabilities 4,332 5,013 Total operating lease liabilities $ 6,882 $ 8,026 Finance leases Finance lease right-of-use assets $ 197 $ 76 Current finance lease liabilities (1) $ 95 38 Non-current finance lease liabilities 101 36 Total finance lease liabilities $ 196 $ 74 Weighted average remaining lease term (in years) Operating leases 3.6 4.2 Finance leases 2.6 2.1 Weighted average discount rate Operating leases 7.1% 7.7% Finance leases 4.4% 7.9% (1) Current lease liabilities are included in “Accrued expenses and other current liabilities.” |
Schedule of maturities of lease liabilities | Operating Finance Leases Leases Year Ending December 31, 2021 $ 2,643 $ 97 2022 2,123 73 2023 1,255 12 2024 981 12 2025 762 9 Thereafter 85 — Total lease payments 7,849 203 Less imputed interest (967) (7) Total 6,882 196 |
Schedule of maturities of lease liabilities | Operating Finance Leases Leases Year Ending December 31, 2021 $ 2,643 $ 97 2022 2,123 73 2023 1,255 12 2024 981 12 2025 762 9 Thereafter 85 — Total lease payments 7,849 203 Less imputed interest (967) (7) Total 6,882 196 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
INTANGIBLE ASSETS | |
Schedule of carrying amount of intangible assets, net of accumulated amortization and impairment charges | 2020 Gross Estimated Carrying Accumulated Currency Net Book Useful Lives Amount Acquisitions Amortization impact Value Amortizable intangibles: Customer relationships 2 to 15 years $ 73,723 $ 1,560 $ (66,705) $ (108) $ 8,470 Noncompete agreements 4 to 7 years 5,952 10 (5,911) — 51 Software 3 to 4 years 1,500 160 (1,511) — 149 Backlog 1 to 2 years 5,002 — (4,981) (21) — Databases 4 to 15 years 13,218 — (6,852) (172) 6,194 Trademark and trade names 5 years 1,250 240 (1,290) — 200 Intangibles $ 100,645 $ 1,970 $ (87,250) $ (301) $ 15,064 2019 Gross Estimated Carrying Accumulated Currency Net Book Useful Lives Amount Acquisitions Amortization impact Value Amortizable intangibles: Customer relationships 2 to 15 years $ 73,723 $ — $ (63,761) $ (116) $ 9,846 Noncompete agreements 4 to 7 years 5,952 — (5,862) 1 91 Software 3 to 4 years 1,500 — (1,500) — — Backlog 1 to 2 years 5,002 — (4,981) (21) — Databases 4 to 15 years 13,218 — (6,364) (186) 6,668 Trademark and trade names 5 years 1,250 — (1,250) — — Intangibles $ 100,645 $ — $ (83,718) $ (322) $ 16,605 |
Schedule of estimated future amortization expense | 2021 $ 2,642 2022 2,110 2023 1,814 2024 1,495 2025 1,326 Thereafter 5,677 $ 15,064 |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
GOODWILL | |
Schedule of changes in the carrying amount of goodwill | 2020 2019 Balance as of January 1 Goodwill $ 85,786 $ 85,786 Foreign currency impact (437) (397) Net balance as of January 1 85,349 85,389 Acquisitions 5,344 — Foreign currency impact and adjustments 315 (40) 5,659 (40) Balance as of December 31 Goodwill 91,130 85,786 Foreign currency impact and adjustments (122) (437) Net balance as of December 31 $ 91,008 $ 85,349 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of components of accrued liabilities | December 31, 2020 2019 Accrued payroll, incentive, and vacation $ 11,630 $ 3,417 Accrued corporate and payroll related taxes 5,459 4,264 Contingent consideration—current 2,929 — Current operating lease liability 2,550 3,013 Other 7,496 5,760 $ 30,064 $ 16,454 |
FINANCING ARRANGEMENTS AND LO_2
FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |
Schedule of long-term debt | December 31, 2020 2019 Senior secured credit facility $ 78,775 $ 86,863 Debt issuance costs (924) (1,040) 77,851 85,823 Less current installments on long term debt 4,300 11,000 Long-term debt $ 73,551 $ 74,823 |
Schedule of aggregate annual maturities of debt obligations by calendar year | Debt 2021 $ 4,300 2022 4,300 2023 4,300 2024 4,300 2025 61,575 $ 78,775 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
INCOME TAXES | |
Schedule of the components of income before income taxes | Years Ended December 31, 2020 2019 Domestic $ (3,361) $ 1,206 Foreign 9,229 5,933 Total income before income taxes $ 5,868 $ 7,139 |
Schedule of the components of income tax provision | Years Ended December 31, 2020 2019 Current: Federal $ (1,368) $ (327) State 564 603 Foreign 3,088 2,431 Total current provision 2,284 2,707 Deferred: Federal 365 (123) State (68) (140) Foreign 532 1,354 Total deferred benefit 829 1,091 Total $ 3,113 $ 3,798 |
Schedule of the differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate | Years Ended December 31, 2020 2019 Tax provision computed at 21% $ 1,232 $ 1,499 Nondeductible expenses 718 521 State income taxes, net of federal benefit 400 327 Tax impact of foreign operations 339 1,347 Valuation allowances increase (release) 517 (141) Net increase (decrease) of uncertain tax positions (34) (34) Other (59) 279 Income tax provision $ 3,113 $ 3,798 Effective income tax rates 53.1 % 53.2 % |
Schedule of significant portions of the deferred tax assets and liabilities due to the tax effects of temporary differences | December 31, 2020 2019 Noncurrent deferred tax asset Compensation related expenses $ 2,081 $ 2,279 Foreign currency translation 1,697 2,458 U.S. foreign tax credit carryovers 1,194 879 Foreign net operating loss carryovers 4,943 5,563 Accruals and reserves 1,026 1,404 Operating lease right-of-use assets 1,396 2,034 Other 405 224 Valuation allowance for deferred tax assets (3,707) (3,989) Total noncurrent deferred tax asset 9,035 10,852 Noncurrent deferred tax liability Depreciable assets (699) (510) Prepaids (428) (514) Intangible assets (911) (1,177) Investment in foreign subsidiaries (3,664) (3,323) Foreign earnings distribution taxes (851) (1,741) Foreign intangibles and reserves (2,888) (1,754) Operating lease liabilities (1,160) (1,716) Total noncurrent deferred tax liability (10,601) (10,735) Net noncurrent deferred tax (liability) asset (1,566) 117 Net deferred tax (liability) asset $ (1,566) $ 117 |
Schedule of reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period | December 31, 2020 2019 Balance, beginning of year $ 1,534 $ 1,475 Additions as a result of tax positions taken during the current period 69 90 Reductions as a result of tax positions taken during a prior period (34) — Reductions as a result of lapse of statute — (31) Balance, end of year $ 1,569 $ 1,534 |
STOCK BASED COMPENSATION PLANS
STOCK BASED COMPENSATION PLANS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
STOCK BASED COMPENSATION PLANS | |
Summary of the status of the Company's RSUs issued under its Incentive Plan | Weighted- Average Grant Date RSU Fair Value Non-vested at December 31, 2018 4,757 $ 3.98 Granted 3,838 $ 2.93 Vested (2,564) $ 3.94 Forfeited (456) $ 4.08 Non-vested at December 31, 2019 5,575 $ 3.22 Granted 4,249 $ 2.01 Vested (2,634) $ 3.68 Forfeited (324) $ 3.00 Non-vested at December 31, 2020 6,866 $ 2.31 |
SEGMENT AND GEOGRAPHICAL INFO_2
SEGMENT AND GEOGRAPHICAL INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
SEGMENT AND GEOGRAPHICAL INFORMATION | |
Schedule of geographical revenue information for the segment | Years Ended December 31, 2020 2019 Revenues Americas (1) $ 141,227 $ 156,075 Europe (2) 87,131 90,739 Asia Pacific (3) 20,770 18,949 $ 249,128 $ 265,763 Fixed assets Americas $ 3,114 $ 4,356 Europe 1,709 1,555 Asia Pacific 178 103 $ 5,001 $ 6,014 (1) Substantially all relates to operations in the United States. (2) Includes revenues from operations in Germany of $43.5 million and $44.4 million in 2020 and 2019, respectively. Includes revenues from operations in the United Kingdom of $19.0 million and $17.2 million in 2020 and 2019, respectively. (3) Includes revenues from operations in Australia of $16.9 million and $15.5 million in 2020 and 2019, respectively. |
RESTRUCTURING CHARGES (Tables)
RESTRUCTURING CHARGES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
RESTRUCTURING CHARGES | |
Summary of the activity affecting the Company's accrued contractual termination benefit liability | Restructuring Plan Balance at January 1, 2020 $ — Amounts accrued 2,349 Amounts paid/incurred (1,592) Balance at December 31, 2020 $ 757 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Furniture, Fixtures and Equipment, net to Reimbursable Expenditures (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Furniture, Fixtures and Equipment, net | ||
Capitalized costs associated with system and website development | $ 300,000 | $ 600,000 |
Goodwill | ||
Impairment of goodwill | 0 | 0 |
Debt Issuance Costs | ||
Amortization of debt issuance costs | $ 403,000 | 610,000 |
Revenue Recognition | ||
Notice period to terminate agreements early due to breach or for convenience | 30 days | |
Reimbursable Expenditures | ||
Reimbursable expenditures | $ 1,700,000 | $ 9,600,000 |
Minimum | ||
Revenue Recognition | ||
Term of provisions | 6 months | |
Maximum | ||
Revenue Recognition | ||
Term of provisions | 12 months | |
Furniture, fixtures and equipment | Minimum | ||
Furniture, Fixtures and Equipment, net | ||
Estimated useful life of assets | 3 years | |
Furniture, fixtures and equipment | Maximum | ||
Furniture, Fixtures and Equipment, net | ||
Estimated useful life of assets | 5 years | |
Leasehold improvements | Minimum | ||
Furniture, Fixtures and Equipment, net | ||
Estimated useful life of assets | 3 years | |
Leasehold improvements | Maximum | ||
Furniture, Fixtures and Equipment, net | ||
Estimated useful life of assets | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details) - Restricted stock units | 12 Months Ended |
Dec. 31, 2020 | |
Employees | |
Stock-Based Compensation | |
Award vesting period | 4 years |
Directors | |
Stock-Based Compensation | |
Award vesting period | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments (Details) | 12 Months Ended | ||
Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2020USD ($) | |
Fair Value of Financial Instruments | |||
Transfers of financial assets between Level 1 and Level 2 | $ 0 | ||
Transfers of financial assets between Level 2 and Level 1 | 0 | ||
Transfers of financial assets into Level 3 | $ 0 | ||
Transfers of financial assets out of Level 3 | 0 | ||
Liabilities: | |||
Contingent consideration | 5,319,000 | $ 1,703,000 | $ 5,319,000 |
Contingent consideration, valuation technique extensible list | us-gaap:IncomeApproachValuationTechniqueMember | ||
Contingent consideration, measurement input Contingent consideration, measurement input | us-gaap:MeasurementInputDiscountRateMember | ||
Contingent consideration, measurement input | 0.0250 | ||
Change in the contingent consideration liability | |||
Beginning Balance | 1,703,000 | ||
Neuralify contingent consideration accrued | 4,900,000 | ||
Payment of contingent consideration | (1,730,000) | ||
Accretion of contingent consideration | 419,000 | 30,000 | |
Unrealized gain (loss) related to currency translation | 3,000 | ||
Ending Balance | 5,319,000 | ||
Outstanding borrowings | $ 86,863,000 | $ 78,775,000 | |
Effective interest rate (as a percent) | 5.20% | 2.50% | |
Fair value of outstanding borrowing | $ 86,700,000 | $ 77,700,000 | |
Debt instrument, valuation technique, extensible list | us-gaap:ValuationTechniqueDiscountedCashFlowMember | ||
Debt instrument, measurement input, extensible list | us-gaap:MeasurementInputDiscountRateMember | ||
Debt instrument, measurement input | 0.0249 | ||
Minimum | |||
Change in the contingent consideration liability | |||
Debt instrument, measurement input | 2.39 | ||
Maximum | |||
Change in the contingent consideration liability | |||
Debt instrument, measurement input | 2.49 | ||
Recurring | |||
Assets: | |||
Cash equivalents | 17,000 | $ 17,000 | |
Total | 17,000 | 17,000 | |
Liabilities: | |||
Contingent consideration | 5,319,000 | 5,319,000 | |
Total | 5,319,000 | ||
Change in the contingent consideration liability | |||
Ending Balance | 5,319,000 | ||
Recurring | Level1 | |||
Assets: | |||
Cash equivalents | 17,000 | 17,000 | |
Total | $ 17,000 | 17,000 | |
Recurring | Level3 | |||
Liabilities: | |||
Contingent consideration | 5,319,000 | 5,319,000 | |
Total | $ 5,319,000 | ||
Change in the contingent consideration liability | |||
Ending Balance | $ 5,319,000 |
REVENUE - Contract Balances (De
REVENUE - Contract Balances (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
REVENUE | ||
Contract assets | $ 21,825 | $ 28,529 |
Contract liabilities | $ 5,121 | $ 4,935 |
REVENUE - Narrative (Details)
REVENUE - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
REVENUE | ||
Revenue recognized, included in contract liability balance | $ 4.6 | $ 5.9 |
Remaining performance obligations | $ 93.2 |
ACQUISITION (Details)
ACQUISITION (Details) - USD ($) $ in Thousands | Jul. 08, 2020 | Dec. 31, 2020 |
Business Acquisition [Line Items] | ||
Contingent consideration | $ 4,900 | |
Neuralify acquisition | ||
Business Acquisition [Line Items] | ||
Cash | $ 2,282 | |
Contingent consideration | 4,900 | |
Total allocable purchase price | $ 7,182 | |
Term of contingent consideration (in months) | 18 months |
ACQUISITION - Identified assets
ACQUISITION - Identified assets acquired, and liabilities assumed and acquisition costs (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Jul. 08, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Identified assets acquired, and liabilities assumed | ||||
Goodwill | $ 91,008 | $ 85,349 | $ 85,389 | |
Neuralify acquisition | ||||
Identified assets acquired, and liabilities assumed | ||||
Accounts receivable | $ 226 | |||
Contract assets | 1 | |||
Intangible assets | 1,970 | |||
Accounts payable | (79) | |||
Contract liabilities | (280) | |||
Net assets acquired | 1,838 | |||
Goodwill | $ 5,344 | |||
Neuralify acquisition | Selling, general and administrative expenses | ||||
Business Acquisition | ||||
Acquisition related cost | $ 100 |
NET INCOME PER COMMON SHARE (De
NET INCOME PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Basic: | ||
Net income | $ 2,755 | $ 3,341 |
Weighted average common shares (in shares) | 47,717 | 46,917 |
Earnings per share (in dollars per share) | $ 0.06 | $ 0.07 |
Diluted: | ||
Net income | $ 2,755 | $ 3,341 |
Basic weighted average common shares (in shares) | 47,717 | 46,917 |
Potential common shares (in shares) | 2,255 | 703 |
Diluted weighted average common shares (in shares) | 49,972 | 47,620 |
Diluted earnings per share (in dollars per share) | $ 0.06 | $ 0.07 |
ACCOUNTS RECEIVABLE AND CONTR_3
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
ACCOUNTS RECEIVABLE AND CONTRACT ASSETS | ||
Accounts receivable | $ 45,499 | $ 48,416 |
Contract assets | 21,825 | 28,529 |
Receivables from related parties | 149 | 131 |
Accounts receivable and contract assets, net | $ 67,473 | $ 77,076 |
FURNITURE, FIXTURES AND EQUIP_3
FURNITURE, FIXTURES AND EQUIPMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Furniture, fixtures and equipment | ||
Accumulated depreciation | $ (13,419) | $ (11,857) |
Furniture, fixtures and equipment, net | 5,001 | 6,014 |
Depreciation expense | 2,664 | 2,697 |
Computer hardware, software and other office equipment | ||
Furniture, fixtures and equipment | ||
Furniture, fixture and equipment, gross | $ 5,238 | 5,037 |
Computer hardware, software and other office equipment | Minimum | ||
Furniture, fixtures and equipment | ||
Estimated Useful Lives (in years) | 2 years | |
Computer hardware, software and other office equipment | Maximum | ||
Furniture, fixtures and equipment | ||
Estimated Useful Lives (in years) | 5 years | |
Furniture, fixtures and leasehold improvements | ||
Furniture, fixtures and equipment | ||
Furniture, fixture and equipment, gross | $ 4,797 | 4,742 |
Furniture, fixtures and leasehold improvements | Minimum | ||
Furniture, fixtures and equipment | ||
Estimated Useful Lives (in years) | 2 years | |
Furniture, fixtures and leasehold improvements | Maximum | ||
Furniture, fixtures and equipment | ||
Estimated Useful Lives (in years) | 5 years | |
Software and development costs | ||
Furniture, fixtures and equipment | ||
Furniture, fixture and equipment, gross | $ 8,385 | $ 8,092 |
Software and development costs | Minimum | ||
Furniture, fixtures and equipment | ||
Estimated Useful Lives (in years) | 3 years | |
Software and development costs | Maximum | ||
Furniture, fixtures and equipment | ||
Estimated Useful Lives (in years) | 5 years |
LEASES (Details)
LEASES (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Lessee, Lease, Description [Line Items] | |
Package of practical expedients | true |
Use of hindsight | true |
Options to extend the leases | True |
Options to terminate the leases | true |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Extended term (in years) | 3 years |
Term of options to terminate the leases (in years) | 1 year |
LEASES - Components of lease ex
LEASES - Components of lease expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Lease cost | ||
Operating lease cost | $ 2,541 | $ 2,935 |
Amortization of right-of-use assets | 53 | 15 |
Interest on lease liabilities | 5 | 3 |
Short-term lease cost | 41 | 30 |
Variable lease cost | 304 | 319 |
Sublease income | (245) | (243) |
Total lease cost | 2,699 | 3,059 |
Supplemental cash flow information related to leases was as follows | ||
Operating cash flows from finance leases | 53 | 13 |
Operating cash flows from operating leases | 3,284 | 3,412 |
Financing cash flows from finance leases | $ 6 | $ 10 |
LEASES - Supplemental balance s
LEASES - Supplemental balance sheet information related to leases (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
LEASES | ||
Operating lease right-of-use assets | $ 5,909 | $ 6,572 |
Current operating lease liabilities | $ 2,550 | $ 3,013 |
Current operating lease liabilities, Statement of Financial Position | us-gaap:AccruedLiabilitiesAndOtherLiabilities | us-gaap:AccruedLiabilitiesAndOtherLiabilities |
Non-current operating lease liabilities | $ 4,332 | $ 5,013 |
Total operating lease liabilities | 6,882 | 8,026 |
Finance lease right-of-use assets | 197 | 76 |
Current finance lease liabilities | $ 95 | $ 38 |
Current finance lease liabilities, Statement of Financial Position | us-gaap:AccruedLiabilitiesAndOtherLiabilities | us-gaap:AccruedLiabilitiesAndOtherLiabilities |
Non-current finance lease liabilities | $ 101 | $ 36 |
Total finance lease liabilities | $ 196 | $ 74 |
Weighted average remaining lease term (in years) - Operating leases | 3 years 7 months 6 days | 4 years 2 months 12 days |
Weighted average remaining lease term (in years) - Finance leases | 2 years 7 months 6 days | 2 years 1 month 6 days |
Weighted average discount rate (as a percentage) - Operating leases | 7.10% | 7.70% |
Weighted average discount rate (as a percentage) - Finance leases | 4.40% | 7.90% |
LEASES - Maturities of lease li
LEASES - Maturities of lease liabilities and minimum rental commitments under non-cancelable operating leases under ASC 840 (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Maturities of lease liabilities - Operating Leases | ||
2021 | $ 2,643 | |
2022 | 2,123 | |
2023 | 1,255 | |
2024 | 981 | |
2025 | 762 | |
Thereafter | 85 | |
Total lease payments | 7,849 | |
Less imputed interest | (967) | |
Total | 6,882 | $ 8,026 |
Maturities of lease liabilities - Finance Leases | ||
2021 | 97 | |
2022 | 73 | |
2023 | 12 | |
2024 | 12 | |
2025 | 9 | |
Total lease payments | 203 | |
Less imputed interest | (7) | |
Total | $ 196 | $ 74 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Intangible assets | ||
Gross Carrying Amount | $ 100,645 | $ 100,645 |
Acquisitions | 1,970 | |
Accumulated Amortization | (87,250) | (83,718) |
Currency impact | (301) | (322) |
Net Book Value | 15,064 | 16,605 |
Amortization expense | 3,532 | 4,011 |
Estimated future amortization expense | ||
2021 | 2,642 | |
2022 | 2,110 | |
2023 | 1,814 | |
2024 | 1,495 | |
2025 | 1,326 | |
Thereafter | 5,677 | |
Estimated future amortization expense | 15,064 | |
Customer relationships | ||
Intangible assets | ||
Gross Carrying Amount | 73,723 | 73,723 |
Acquisitions | 1,560 | |
Accumulated Amortization | (66,705) | (63,761) |
Currency impact | (108) | (116) |
Net Book Value | 8,470 | 9,846 |
Noncompete agreements | ||
Intangible assets | ||
Gross Carrying Amount | 5,952 | 5,952 |
Acquisitions | 10 | |
Accumulated Amortization | (5,911) | (5,862) |
Currency impact | 1 | |
Net Book Value | 51 | 91 |
Software | ||
Intangible assets | ||
Gross Carrying Amount | 1,500 | 1,500 |
Acquisitions | 160 | |
Accumulated Amortization | (1,511) | (1,500) |
Net Book Value | 149 | |
Backlog | ||
Intangible assets | ||
Gross Carrying Amount | 5,002 | 5,002 |
Accumulated Amortization | (4,981) | (4,981) |
Currency impact | (21) | (21) |
Databases | ||
Intangible assets | ||
Gross Carrying Amount | 13,218 | 13,218 |
Accumulated Amortization | (6,852) | (6,364) |
Currency impact | (172) | (186) |
Net Book Value | $ 6,194 | $ 6,668 |
Trademarks and trade names | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 5 years | 5 years |
Gross Carrying Amount | $ 1,250 | $ 1,250 |
Acquisitions | 240 | |
Accumulated Amortization | (1,290) | $ (1,250) |
Net Book Value | $ 200 | |
Minimum | Customer relationships | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 2 years | 2 years |
Minimum | Noncompete agreements | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 4 years | 4 years |
Minimum | Software | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 3 years | 3 years |
Minimum | Backlog | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 1 year | 1 year |
Minimum | Databases | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 4 years | 4 years |
Maximum | Customer relationships | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 15 years | 15 years |
Maximum | Noncompete agreements | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 7 years | 7 years |
Maximum | Software | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 4 years | 4 years |
Maximum | Backlog | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 2 years | 2 years |
Maximum | Databases | ||
Intangible assets | ||
Estimated Useful Lives (in years) | 15 years | 15 years |
GOODWILL (Details)
GOODWILL (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Changes in the carrying amount of goodwill | ||
Gross balance at the beginning | $ 85,786 | $ 85,786 |
Foreign currency impact | (437) | (397) |
Balance at the beginning | 85,349 | 85,389 |
Acquisitions | 5,344 | |
Foreign currency impact and adjustments | 315 | (40) |
Goodwill, Period Increase (Decrease) | 5,659 | (40) |
Gross balance at the end | 91,130 | 85,786 |
Foreign currency impact and adjustments | (122) | (437) |
Balance at the end | $ 91,008 | $ 85,349 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||
Accrued payroll, incentive, and vacation | $ 11,630 | $ 3,417 |
Accrued corporate and payroll related taxes | 5,459 | 4,264 |
Contingent consideration-current | 2,929 | |
Current operating lease liabilities | 2,550 | 3,013 |
Other | 7,496 | 5,760 |
Accrued expenses and other current liabilities | $ 30,064 | $ 16,454 |
FINANCING ARRANGEMENTS AND LO_3
FINANCING ARRANGEMENTS AND LONG-TERM DEBT - Long-term Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||
Senior secured credit facility | $ 78,775 | $ 86,863 |
Debt issuance costs | (924) | (1,040) |
Long-term debt, net | 77,851 | 85,823 |
Less current installments on long term debt | 4,300 | 11,000 |
Long-term debt | $ 73,551 | $ 74,823 |
FINANCING ARRANGEMENTS AND LO_4
FINANCING ARRANGEMENTS AND LONG-TERM DEBT - Annual Maturities of Debt Obligations Tables (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Aggregate annual maturities of debt obligations | ||
2021 | $ 4,300 | |
2022 | 4,300 | |
2023 | 4,300 | |
2024 | 4,300 | |
2025 | 61,575 | |
Long-term debt, total | $ 78,775 | $ 86,863 |
FINANCING ARRANGEMENTS AND LO_5
FINANCING ARRANGEMENTS AND LONG-TERM DEBT - Narrative (Details) | Mar. 10, 2020USD ($)installment | Dec. 31, 2020USD ($) | Mar. 09, 2020USD ($) | Dec. 31, 2019USD ($) |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Outstanding borrowings | $ 78,775,000 | $ 86,863,000 | ||
Effective interest rate (as a percent) | 2.50% | 5.20% | ||
Fair value of outstanding borrowing | $ 77,700,000 | $ 86,700,000 | ||
Debt Instrument, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueDiscountedCashFlowMember | |||
Debt Instrument, Measurement Input [Extensible List] | us-gaap:MeasurementInputDiscountRateMember | |||
Debt instrument, measurement input | 0.0249 | |||
Minimum | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Debt instrument, measurement input | 2.39 | |||
Maximum | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Debt instrument, measurement input | 2.49 | |||
Eurodollar Rate | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Interest rate basis | Eurodollar Rate | |||
2020 Credit Agreement | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
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% | |||
2020 Credit Agreement | Federal Funds Rate | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Applicable margin (as a percent) | 0.50% | |||
2020 Credit Agreement | Eurodollar Rate | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Applicable margin (as a percent) | 1.00% | |||
2020 Credit Agreement | Term loan facility | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Maximum borrowing capacity | $ 86,000,000 | |||
Number of quarterly installments | installment | 19 | |||
Periodic repayment | $ 1,075,000 | |||
2020 Credit Agreement | Revolving facility | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Maximum borrowing capacity | $ 54,000,000 | $ 30,000,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2018 |
Contingent Consideration | ||
Contingent consideration liability | $ 5,319 | $ 1,703 |
Contingent consideration-current | 2,929 | |
Neuralify acquisition | ||
Contingent Consideration | ||
Contingent consideration liability | 5,300 | |
Neuralify acquisition | Accrued expenses | ||
Contingent Consideration | ||
Contingent consideration-current | $ 2,900 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
RELATED PARTY TRANSACTIONS | ||
Receivables from related parties, including shareholders | $ 149 | $ 131 |
Payable to related parties | $ 0 | $ 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income before income taxes | ||
Domestic | $ (3,361) | $ 1,206 |
Foreign | 9,229 | 5,933 |
Income before taxes | 5,868 | 7,139 |
Current: | ||
Federal | (1,368) | (327) |
State | 564 | 603 |
Foreign | 3,088 | 2,431 |
Total current provision | 2,284 | 2,707 |
Deferred: | ||
Federal | 365 | (123) |
State | (68) | (140) |
Foreign | 532 | 1,354 |
Total deferred benefit | 829 | 1,091 |
Income tax provision | $ 3,113 | $ 3,798 |
U.S. federal statutory income tax rate (as a percent) | 21.00% | 21.00% |
Differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate | ||
Tax provision computed at 21% | $ 1,232 | $ 1,499 |
Nondeductible expenses | 718 | 521 |
State income taxes, net of federal benefit | 400 | 327 |
Tax impact of foreign operations | 339 | 1,347 |
Valuation allowances increase (release) | 517 | (141) |
Net increase (decrease) of uncertain tax positions | (34) | (34) |
Other | (59) | 279 |
Income tax provision | $ 3,113 | $ 3,798 |
Effective income tax rates (as a percent) | 53.10% | 53.20% |
Noncurrent deferred tax asset | ||
Compensation related expenses | $ 2,081 | $ 2,279 |
Foreign currency translation | 1,697 | 2,458 |
U.S. foreign tax credit carryovers | 1,194 | 879 |
Foreign net operating loss carryovers | 4,943 | 5,563 |
Accruals and reserves | 1,026 | 1,404 |
Operating lease right-of-use assets | 1,396 | 2,034 |
Other | 405 | 224 |
Valuation allowance for deferred tax assets | (3,707) | (3,989) |
Total noncurrent deferred tax asset | 9,035 | 10,852 |
Noncurrent deferred tax liability | ||
Depreciable assets | (699) | (510) |
Prepaids | (428) | (514) |
Intangible assets | (911) | (1,177) |
Investment in foreign subsidiaries | (3,664) | (3,323) |
Foreign earnings distribution taxes | (851) | (1,741) |
Foreign intangibles and reserves | (2,888) | (1,754) |
Operating lease liabilities | (1,160) | (1,716) |
Total noncurrent deferred tax liability | (10,601) | (10,735) |
Net deferred tax asset | 117 | |
Net deferred tax liability | (1,566) | |
Reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period | ||
Balance, beginning of year | 1,534 | 1,475 |
Additions as a result of tax positions taken during the current period | 69 | 90 |
Reductions as a result of tax positions taken during a prior period | (34) | |
Reductions as a result of lapse of statute | (31) | |
Balance, end of year | 1,569 | $ 1,534 |
Income tax expense recognized of interest and penalties related to uncertain tax positions | 900 | |
Unrecognized tax benefits that would impact the company's effective tax rate | 1,600 | |
Foreign | ||
Noncurrent deferred tax liability | ||
Net operating loss (NOL) carryforwards | 14,300 | |
Federal | ||
Noncurrent deferred tax liability | ||
Tax credit carryforward | $ 1,200 |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
STOCK-BASED COMPENSATION PLANS | ||
Recognized employee stock-based compensation expense | $ 8,900,000 | $ 9,600,000 |
Employee Stock Purchase Plan | ||
STOCK-BASED COMPENSATION PLANS | ||
Shares available for grant | 1,161,220 | |
Weighted-Average Grant Date Fair Value | ||
Shares available under the plan | 3,600,000 | |
Offering period for the plan (in months) | 3 months | |
Period of interval between occurrence of purchases (in months) | 3 months | |
IRS regulated cap for payroll deduction to purchase common stock | $ 25,000 | |
Purchase price expressed as a percentage of fair market value of common stock (as a percent) | 90.00% | |
Shares issued under ESPP | 237,726 | |
Shares available for purchase under ESPP | 1,161,220 | |
Minimum | Employee Stock Purchase Plan | ||
Weighted-Average Grant Date Fair Value | ||
Eligible service period of employees per week to participate in the plan (in hours) | 20 hours | |
Eligible service period of employees in a calendar year to participate in the plan (in months) | 5 months | |
Percentage of employees' eligible earnings as payroll deduction to purchase common stock | 1.00% | |
Maximum | Employee Stock Purchase Plan | ||
Weighted-Average Grant Date Fair Value | ||
Percentage of employees' eligible earnings as payroll deduction to purchase common stock | 10.00% | |
2007 Equity Incentive Plan | ||
STOCK-BASED COMPENSATION PLANS | ||
Shares available for grant | 3,455,800 | |
Weighted-Average Grant Date Fair Value | ||
Total fair value RSUs vested (in dollars) | $ 9,700,000 | $ 10,100,000 |
Unrecognized compensation cost related to the RSUs | $ 8,800,000 | |
2007 Equity Incentive Plan | Maximum | ||
STOCK-BASED COMPENSATION PLANS | ||
Expiration period (in years) | 10 years | |
2007 Equity Incentive Plan | Restricted stock units | ||
STOCK-BASED COMPENSATION PLANS | ||
Percentage of relevant period has elapsed for pro rata vesting of the awards | 50.00% | |
RSU | ||
Non-vested at the beginning of the period (in shares) | 5,575,000 | 4,757,000 |
Granted (in shares) | 4,249,000 | 3,838,000 |
Vested (in shares) | (2,634,000) | (2,564,000) |
Forfeited (in shares) | (324,000) | (456,000) |
Non-vested at the end of the period (in shares) | 6,866,000 | 5,575,000 |
Weighted-Average Grant Date Fair Value | ||
Non-vested at the beginning of the period (in dollars per share) | $ 3.22 | $ 3.98 |
Granted (in dollars per share) | 2.01 | 2.93 |
Vested (in dollars per share) | 3.68 | 3.94 |
Forfeited (in dollars per share) | 3 | 4.08 |
Non-vested at the end of the period (in dollars per share) | $ 2.31 | $ 3.22 |
Weighted-average period to recognize unrecognized compensation cost | 2 years 1 month 6 days | |
2007 Equity Incentive Plan | Restricted stock units | Awards Vesting On Employment Through The Fourth Anniversary Of Grant | ||
STOCK-BASED COMPENSATION PLANS | ||
Award vesting percentage | 100.00% | |
2007 Equity Incentive Plan | Restricted stock units | Awards Vesting On Change In Control | ||
STOCK-BASED COMPENSATION PLANS | ||
Award vesting percentage | 100.00% | |
Incentive Plan Amendment | ||
STOCK-BASED COMPENSATION PLANS | ||
Additional shares authorized | 5,500,000 |
SEGMENT AND GEOGRAPHICAL INFO_3
SEGMENT AND GEOGRAPHICAL INFORMATION (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | |
Segment and geographical information | ||
Number of segments | segment | 1 | |
Revenues | $ 249,128 | $ 265,763 |
Fixed assets | 5,001 | 6,014 |
Americas | ||
Segment and geographical information | ||
Revenues | 141,227 | 156,075 |
Fixed assets | 3,114 | 4,356 |
Europe | ||
Segment and geographical information | ||
Revenues | 87,131 | 90,739 |
Fixed assets | 1,709 | 1,555 |
Asia Pacific | ||
Segment and geographical information | ||
Revenues | 20,770 | 18,949 |
Fixed assets | 178 | 103 |
Germany | ||
Segment and geographical information | ||
Revenues | 43,500 | 44,400 |
United Kingdom | ||
Segment and geographical information | ||
Revenues | 19,000 | 17,200 |
Australia | ||
Segment and geographical information | ||
Revenues | $ 16,900 | $ 15,500 |
RISKS AND UNCERTAINTIES (Detail
RISKS AND UNCERTAINTIES (Details) | 12 Months Ended |
Dec. 31, 2020 | |
RISKS AND UNCERTAINTIES | |
Adjusted Debt to EBITDA ratio | 3.25 |
RESTRUCTURING CHARGES (Details)
RESTRUCTURING CHARGES (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($) | |
RESTRUCTURING CHARGES | |
Amounts accrued | $ 2,349 |
Amounts paid/incurred | (1,592) |
Balance at December 31, 2020 | 757 |
Restructuring charges | $ 2,349 |
Term to complete the remaining restructuring actions (in months) | 3 months |
Selling, general and administrative expenses | |
RESTRUCTURING CHARGES | |
Amounts accrued | $ 2,300 |
Restructuring charges | $ 2,300 |
SCHEDULE II - VALUATION AND Q_2
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Allowance for doubtful accounts | ||
Changes in valuation and qualifying accounts | ||
Balance at Beginning of Period | $ 343 | $ 401 |
Charges to Costs and Expenses | 817 | 75 |
Additions/(Deductions) | (792) | (133) |
Balance at End of Period | 368 | 343 |
Allowance for tax valuation | ||
Changes in valuation and qualifying accounts | ||
Balance at Beginning of Period | 3,989 | 4,209 |
Charges to Costs and Expenses | 517 | (141) |
Additions/(Deductions) | (799) | (79) |
Balance at End of Period | $ 3,707 | $ 3,989 |