Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2022 | Apr. 29, 2022 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2022 | |
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, $0.001 par value | |
Trading Symbol | III | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 48,116,051 | |
Entity Central Index Key | 0001371489 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 43,664 | $ 47,521 |
Accounts receivable and contract assets, net of allowance of $354 and $40, respectively | 67,152 | 64,344 |
Prepaid expenses and other current assets | 3,665 | 4,245 |
Total current assets | 114,481 | 116,110 |
Restricted cash | 86 | 88 |
Furniture, fixtures and equipment, net | 6,308 | 5,293 |
Right-of-use lease assets | 4,808 | 5,293 |
Goodwill | 90,808 | 90,790 |
Intangible assets, net | 11,885 | 12,410 |
Deferred tax assets | 2,221 | 2,197 |
Other assets | 3,981 | 4,613 |
Total assets | 234,578 | 236,794 |
Current liabilities | ||
Accounts payable | 13,121 | 16,162 |
Current maturities of long-term debt | 4,300 | 4,300 |
Contract liabilities | 7,507 | 7,049 |
Accrued expenses and other current liabilities | 31,852 | 29,327 |
Total current liabilities | 56,780 | 56,838 |
Long-term debt, net of current maturities | 68,472 | 69,490 |
Deferred tax liabilities | 2,807 | 2,824 |
Operating lease liabilities | 3,054 | 3,481 |
Other liabilities | 6,034 | 5,768 |
Total liabilities | 137,147 | 138,401 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity | ||
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued | ||
Common stock, $0.001 par value, 100,000 shares authorized; 49,362 shares issued and 48,230 outstanding at March 31, 2022 and 49,362 shares issued and 48,856 outstanding at December 31, 2021 | 49 | 49 |
Additional paid-in capital | 236,724 | 237,628 |
Treasury stock (1,132 and 506 common shares, respectively, at cost) | (8,325) | (3,871) |
Accumulated other comprehensive loss | (7,474) | (6,940) |
Accumulated deficit | (123,543) | (128,473) |
Total stockholders' equity | 97,431 | 98,393 |
Total liabilities and stockholders' equity | $ 234,578 | $ 236,794 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivables and contract assets, allowances | $ 354 | $ 40 |
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 | 49,362 | 49,362 |
Common stock, shares outstanding | 48,230 | 48,856 |
Treasury stock, shares | 1,132 | 506 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME | ||
Revenues | $ 72,563 | $ 66,571 |
Operating expenses | ||
Direct costs and expenses for advisors | 43,955 | 41,156 |
Selling, general and administrative | 19,587 | 19,040 |
Depreciation and amortization | 1,289 | 1,360 |
Operating income | 7,732 | 5,015 |
Interest income | 45 | 71 |
Interest expense | (563) | (643) |
Foreign currency transaction gain (loss) | 24 | (11) |
Income before taxes | 7,238 | 4,432 |
Income tax provision | 2,308 | 1,008 |
Net income | $ 4,930 | $ 3,424 |
Weighted average shares outstanding: | ||
Basic | 48,526 | 48,504 |
Diluted | 51,326 | 52,313 |
Earnings per share: | ||
Basic | $ 0.10 | $ 0.07 |
Diluted | $ 0.10 | $ 0.07 |
Comprehensive income: | ||
Net income | $ 4,930 | $ 3,424 |
Foreign currency translation, net of tax benefit of $169 and $343, respectively | (534) | (1,061) |
Comprehensive income | $ 4,396 | $ 2,363 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME | ||
Foreign currency translation, tax benefit | $ 169 | $ 343 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock [Member] | Additional Paid In Capital [Member] | Treasury Stock [Member] | Accumulated Other Comprehensive Loss [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2020 | $ 48 | $ 248,018 | $ (256) | $ (4,671) | $ (144,002) | $ 99,137 |
Balance (in shares) at Dec. 31, 2020 | 48,297 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 3,424 | 3,424 | ||||
Other comprehensive loss | (1,061) | (1,061) | ||||
Treasury shares repurchased | (2,950) | (2,950) | ||||
Proceeds from issuance of ESPP shares | 40 | 89 | 129 | |||
Issuance of common stock for RSUs vested | $ 1 | (1) | ||||
Issuance of common stock for RSUs vested (in shares) | 1,065 | |||||
Stock based compensation | 2,148 | 2,148 | ||||
Balance at Mar. 31, 2021 | $ 49 | 250,205 | (3,117) | (5,732) | (140,578) | 100,827 |
Balance (in shares) at Mar. 31, 2021 | 49,362 | |||||
Balance at Dec. 31, 2021 | $ 49 | 237,628 | (3,871) | (6,940) | (128,473) | $ 98,393 |
Balance (in shares) at Dec. 31, 2021 | 49,362 | 49,362 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 4,930 | $ 4,930 | ||||
Other comprehensive loss | (534) | (534) | ||||
Treasury shares repurchased | (5,489) | (5,489) | ||||
Proceeds from issuance of ESPP shares | (9) | 195 | 186 | |||
Issuance of treasury shares for RSUs vested | (840) | 840 | ||||
Accrued dividends on unvested shares | (101) | (101) | ||||
Dividends payable | (1,447) | (1,447) | ||||
Cash dividends paid to shareholders | (10) | (10) | ||||
Stock based compensation | 1,503 | 1,503 | ||||
Balance at Mar. 31, 2022 | $ 49 | $ 236,724 | $ (8,325) | $ (7,474) | $ (123,543) | $ 97,431 |
Balance (in shares) at Mar. 31, 2022 | 49,362 | 49,362 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash flows from operating activities | ||
Net income | $ 4,930 | $ 3,424 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation expense | 761 | 646 |
Amortization of intangible assets | 528 | 714 |
Deferred tax benefit from stock issuances | (129) | (526) |
Amortization of deferred financing costs | 86 | 90 |
Stock-based compensation | 1,503 | 2,148 |
Change in fair value of contingent consideration | 1,428 | 32 |
Provisions (benefits) for accounts receivable | 300 | (62) |
Deferred tax provision | 256 | 578 |
Changes in operating assets and liabilities: | ||
Accounts receivable and contract assets | (2,996) | 1,555 |
Prepaid expense and other assets | 1,499 | 1,382 |
Accounts payable | (3,390) | 6,484 |
Contract liabilities | 457 | 822 |
Accrued expenses | (1,122) | (5,234) |
Net cash provided by operating activities | 4,111 | 12,053 |
Cash flows from investing activities | ||
Purchase of furniture, fixtures and equipment | (1,046) | (441) |
Net cash used in investing activities | (1,046) | (441) |
Cash flows from financing activities | ||
Principal payments on borrowings | (1,075) | (1,075) |
Proceeds from issuance of employee stock purchase plan shares | 186 | 129 |
Payments related to tax withholding for stock-based compensation | (333) | (1,939) |
Cash dividends paid to shareholders | (10) | |
Treasury shares repurchased | (5,156) | (2,950) |
Net cash used in financing activities | (6,388) | (5,835) |
Effect of exchange rate changes on cash | (536) | (938) |
Net (decrease) increase in cash, cash equivalents, and restricted cash | (3,859) | 4,839 |
Cash, cash equivalents, and restricted cash, beginning of period | 47,609 | 43,825 |
Cash, cash equivalents, and restricted cash, end of period | 43,750 | $ 48,664 |
Non-cash investing and financing activities: | ||
Issuance of treasury stock for vested restricted stock awards | $ 840 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 3 Months Ended |
Mar. 31, 2022 | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Information Services Group, Inc. (the “Company”, or “ISG”) is a leading global technology research and advisory firm. A trusted business partner to over 800 clients, including more than 75 of the top 100 enterprises in our markets, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm 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. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2022 | |
BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | NOTE 2—BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are considered necessary for a fair statement of the financial position of the Company as of March 31, 2022 and the results of operations for the three months ended March 31, 2022 and 2021 and the cash flows for the three months ended March 31, 2022 and 2021. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the Company’s audited consolidated financial statements. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2021, which are included in the Company’s 2021 Annual Report on Form 10-K filed with the SEC. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates 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. Fair Value The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at March 31, 2022 and December 31, 2021 due to the short-term nature of these accounts. Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would primarily consist of measurements to contingent consideration 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: ● Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; ● Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and ● Level 3 measurements include those that are unobservable and of a highly subjective measure. The following tables summarize the assets measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements March 31, 2022 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 1,018 $ — $ — $ 1,018 Total $ 1,018 $ — $ — $ 1,018 Liabilities: Contingent consideration (1) $ — $ — $ 992 $ 992 Total $ — $ — $ 992 $ 992 Basis of Fair Value Measurements December 31, 2021 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 1,018 $ — $ — $ 1,018 Total $ 1,018 $ — $ — $ 1,018 Liabilities: Contingent consideration (1) $ — $ — $ 2,420 $ 2,420 Total $ — $ — $ 2,420 $ 2,420 (1) The fair value measurement of the 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 discounted using a rate The following table represents the change in the contingent consideration liability during the three months ended March 31, 2022: Three Months Ended March 31, 2022 Beginning Balance $ 2,420 Neuralify earnout adjustment (1) (1,428) Ending Balance $ 992 (1) The Company’s financial instruments include outstanding borrowings of $73.4 million at March 31, 2022 and $74.5 million at December 31, 2021, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company's outstanding borrowings is approximately $72.3 million and $73.6 million at March 31, 2022 and December 31, 2021, respectively. The fair values of debt have been estimated using a discounted cash flow discount 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. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 31, 2022 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 4 — ACQUISITIONS 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. In October 2021, the 18-month period was extended six months to July 2022. On the date of the Agreement, 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 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 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, 2020, the impact on the Company’s results of operations would not have been material. As of March 31, 2022, the Company has recorded a liability of $1.0 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, which is classified as current and included in “Accrued expenses and other current liabilities” on the Consolidated Balance Sheet. Agreemint Acquisition On March 28, 2022, ISG executed an asset purchase agreement for the purchase of substantially all of the assets of Agreemint, which is an automated, platform-based contracting solution that will enhance the value of ISG GovernX and our other platform solutions now in development. We determined the transaction to be an asset acquisition as substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset: the software and related intellectual property rights. The cash paid for the acquisition as of the balance sheet date is reflected in Cash flows from investing activities of the Statement of Cash Flows. The related software acquired, which is capitalized within “Furniture, fixtures and equipment, net”, will be depreciated over four years when put into service at the end of the 60-day transition period underway to integrate the offering with our ISG GovernX cloud solution. |
REVENUE
REVENUE | 3 Months Ended |
Mar. 31, 2022 | |
REVENUE | |
REVENUE | NOTE 5—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. 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. March 31, December 31, 2022 2021 Contract assets $ 23,766 $ 18,639 Contract liabilities $ 7,507 $ 7,049 Revenue recognized for the three months ended March 31, 2022 that was included in the contract liability balance at January 1, 2022 was $3.6 million, and represented primarily revenue from our fixed fee and subscription contracts. Remaining Performance Obligations As of March 31, 2022, the Company had $119.9 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months. |
NET INCOME PER COMMON SHARE
NET INCOME PER COMMON SHARE | 3 Months Ended |
Mar. 31, 2022 | |
NET INCOME PER COMMON SHARE | |
NET INCOME PER COMMON SHARE | NOTE 6—NET INCOME PER COMMON SHARE Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company. For the three months ended March 31, 2022 and 2021, 0.0 million The following tables set forth the computation of basic and diluted earnings per share: Three Months Ended March 31, 2022 2021 Basic: Net income $ 4,930 $ 3,424 Weighted average common shares 48,526 48,504 Earnings per share $ 0.10 $ 0.07 Diluted: Net income $ 4,930 $ 3,424 Basic weighted average common shares 48,526 48,504 Potential common shares 2,800 3,809 Diluted weighted average common shares 51,326 52,313 Diluted earnings per share $ 0.10 $ 0.07 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2022 | |
INCOME TAXES | |
INCOME TAXES | NOTE 7—INCOME TAXES The Company’s effective tax rate for the three months ended March 31, 2022, and 2021 was 31.9% and 22.7% based on pretax income of $7.2 million and $4.4 million, respectively. The Company’s effective tax rate for the quarter ended March 31, 2021 was impacted by the earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 8—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 March 31, 2022 and December 31, 2021. |
SEGMENT AND GEOGRAPHICAL INFORM
SEGMENT AND GEOGRAPHICAL INFORMATION | 3 Months Ended |
Mar. 31, 2022 | |
SEGMENT AND GEOGRAPHICAL INFORMATION | |
SEGMENT AND GEOGRAPHICAL INFORMATION | NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION The Company operates as one reportable segment consisting primarily of fact-based sourcing advisory services. The Company operates principally in the Americas, Europe and Asia Pacific. Geographical revenue information for the segment is as follows: Three Months Ended March 31, 2022 2021 Revenues Americas $ 41,437 $ 38,090 Europe 23,463 22,742 Asia Pacific 7,663 5,739 $ 72,563 $ 66,571 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 by service line for the purposes of making operating decisions or allocating resources. |
FINANCING ARRANGEMENTS AND LONG
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | 3 Months Ended |
Mar. 31, 2022 | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | NOTE 10—FINANCING ARRANGEMENTS AND LONG-TERM DEBT 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 $73.4 million and $74.5 million at March 31, 2022 and December 31, 2021, respectively, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company's outstanding borrowings is approximately $72.3 million and $73.6 million at March 31, 2022 and December 31, 2021, respectively. The fair values of debt have been estimated using a discounted cash flow discount similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates. As of March 31, 2022 and December 31, 2021, there were no borrowings under the revolver. The Company is currently in compliance with its financial covenants. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Use of Estimates | Use of Estimates |
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. |
Fair Value | Fair Value The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at March 31, 2022 and December 31, 2021 due to the short-term nature of these accounts. Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would primarily consist of measurements to contingent consideration 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: ● Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; ● Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and ● Level 3 measurements include those that are unobservable and of a highly subjective measure. The following tables summarize the assets measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements March 31, 2022 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 1,018 $ — $ — $ 1,018 Total $ 1,018 $ — $ — $ 1,018 Liabilities: Contingent consideration (1) $ — $ — $ 992 $ 992 Total $ — $ — $ 992 $ 992 Basis of Fair Value Measurements December 31, 2021 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 1,018 $ — $ — $ 1,018 Total $ 1,018 $ — $ — $ 1,018 Liabilities: Contingent consideration (1) $ — $ — $ 2,420 $ 2,420 Total $ — $ — $ 2,420 $ 2,420 (1) The fair value measurement of the 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 discounted using a rate The following table represents the change in the contingent consideration liability during the three months ended March 31, 2022: Three Months Ended March 31, 2022 Beginning Balance $ 2,420 Neuralify earnout adjustment (1) (1,428) Ending Balance $ 992 (1) The Company’s financial instruments include outstanding borrowings of $73.4 million at March 31, 2022 and $74.5 million at December 31, 2021, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company's outstanding borrowings is approximately $72.3 million and $73.6 million at March 31, 2022 and December 31, 2021, respectively. The fair values of debt have been estimated using a discounted cash flow discount |
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) | 3 Months Ended |
Mar. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of assets measured at fair value on a recurring basis | Basis of Fair Value Measurements March 31, 2022 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 1,018 $ — $ — $ 1,018 Total $ 1,018 $ — $ — $ 1,018 Liabilities: Contingent consideration (1) $ — $ — $ 992 $ 992 Total $ — $ — $ 992 $ 992 Basis of Fair Value Measurements December 31, 2021 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 1,018 $ — $ — $ 1,018 Total $ 1,018 $ — $ — $ 1,018 Liabilities: Contingent consideration (1) $ — $ — $ 2,420 $ 2,420 Total $ — $ — $ 2,420 $ 2,420 (1) |
Schedule of change in the contingent consideration liability | Three Months Ended March 31, 2022 Beginning Balance $ 2,420 Neuralify earnout adjustment (1) (1,428) Ending Balance $ 992 (1) |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
ACQUISITIONS | |
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 |
REVENUE (Tables)
REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
REVENUE | |
Schedule of contract assets and contract liabilities | March 31, December 31, 2022 2021 Contract assets $ 23,766 $ 18,639 Contract liabilities $ 7,507 $ 7,049 |
NET INCOME PER COMMON SHARE (Ta
NET INCOME PER COMMON SHARE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
NET INCOME PER COMMON SHARE | |
Schedule of computation of basic and diluted earnings per share | Three Months Ended March 31, 2022 2021 Basic: Net income $ 4,930 $ 3,424 Weighted average common shares 48,526 48,504 Earnings per share $ 0.10 $ 0.07 Diluted: Net income $ 4,930 $ 3,424 Basic weighted average common shares 48,526 48,504 Potential common shares 2,800 3,809 Diluted weighted average common shares 51,326 52,313 Diluted earnings per share $ 0.10 $ 0.07 |
SEGMENT AND GEOGRAPHICAL INFO_2
SEGMENT AND GEOGRAPHICAL INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
SEGMENT AND GEOGRAPHICAL INFORMATION | |
Schedule of geographical revenue information for the segment | Three Months Ended March 31, 2022 2021 Revenues Americas $ 41,437 $ 38,090 Europe 23,463 22,742 Asia Pacific 7,663 5,739 $ 72,563 $ 66,571 |
DESCRIPTION OF ORGANIZATION A_2
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (Details) | Mar. 31, 2022employeeclientcountry |
Number of digital-ready professionals | employee | 1,300 |
Minimum | |
Number of clients | 800 |
Number of clients from top 100 enterprises in the markets | 75 |
Number of countries | country | 20 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022USD ($) | Dec. 31, 2021USD ($) | |
Liabilities: | ||
Contingent consideration | $ 992 | $ 2,420 |
Contingent consideration, valuation technique extensible list | us-gaap:IncomeApproachValuationTechniqueMember | |
Contingent consideration, measurement input extensible list | us-gaap:MeasurementInputDiscountRateMember | |
Contingent consideration, measurement input | 2.50 | |
Change in the contingent consideration liability | ||
Beginning Balance | $ 2,420 | |
Neuralify earnout adjustment | (1,428) | |
Ending Balance | 992 | |
Outstanding borrowings | 73,400 | 74,500 |
Fair value of outstanding borrowing | $ 72,300 | $ 73,600 |
Debt instrument, valuation technique, extensible list | us-gaap:ValuationTechniqueDiscountedCashFlowMember | |
Debt instrument, measurement input, extensible list | us-gaap:MeasurementInputDiscountRateMember | |
Debt instrument, measurement input | 0.025 | 0.020 |
Recurring | ||
Assets: | ||
Cash equivalents | $ 1,018 | $ 1,018 |
Total | 1,018 | 1,018 |
Liabilities: | ||
Contingent consideration | 992 | 2,420 |
Total | 992 | 2,420 |
Change in the contingent consideration liability | ||
Beginning Balance | 2,420 | |
Ending Balance | 992 | |
Recurring | Fair Value Inputs Level1 | ||
Assets: | ||
Cash equivalents | 1,018 | 1,018 |
Total | 1,018 | 1,018 |
Recurring | Fair Value Inputs Level 3 | ||
Liabilities: | ||
Contingent consideration | 992 | 2,420 |
Total | 992 | $ 2,420 |
Change in the contingent consideration liability | ||
Beginning Balance | 2,420 | |
Ending Balance | $ 992 |
ACQUISITIONS - Neuralify Acquis
ACQUISITIONS - Neuralify Acquisition (Details) - Neuralify acquisition - USD ($) $ in Thousands | Jul. 08, 2020 | Oct. 31, 2021 |
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 | 18 months |
Term of contingent consideration, extension term (in months) | 6 months |
ACQUISITIONS - Neuralify Acqu_2
ACQUISITIONS - Neuralify Acquisition - Acquisition costs and identified assets acquired and liabilities assumed (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Mar. 31, 2022 | Dec. 31, 2021 | Jul. 08, 2020 | |
Identified assets acquired, and liabilities assumed | ||||
Goodwill | $ 90,808 | $ 90,790 | ||
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 | Accrued expenses and other current liabilities | ||||
Identified assets acquired, and liabilities assumed | ||||
Fair value of contingent | $ 1,000 | |||
Neuralify acquisition | Selling, general and administrative expenses | ||||
Identified assets acquired, and liabilities assumed | ||||
Acquisition related cost | $ 100 |
ACQUISITIONS - Agreemint Acquis
ACQUISITIONS - Agreemint Acquisition (Details) - Agreemint Acquisition | Mar. 28, 2022 |
Asset Acquisition [Line Items] | |
Transition period | 60 days |
Software And Software Development Costs | |
Asset Acquisition [Line Items] | |
Estimated useful life of assets | 4 years |
REVENUE - Contract Balances (De
REVENUE - Contract Balances (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
REVENUE | ||
Contract assets | $ 23,766 | $ 18,639 |
Contract liabilities | $ 7,507 | $ 7,049 |
REVENUE - Narrative (Details)
REVENUE - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2022USD ($) | |
REVENUE | |
Revenue recognized, included in contract liability balance | $ 3.6 |
Remaining performance obligations | $ 119.9 |
NET INCOME PER COMMON SHARE - A
NET INCOME PER COMMON SHARE - Antidilutive Securities (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Restricted Stock Units R S U | ||
Antidilutive securities | ||
Securities considered antidilutive (in shares) | 0 | 0.1 |
NET INCOME PER COMMON SHARE (De
NET INCOME PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Basic: | ||
Net income | $ 4,930 | $ 3,424 |
Weighted average common shares (in shares) | 48,526 | 48,504 |
Earnings per share (in dollars per share) | $ 0.10 | $ 0.07 |
Diluted: | ||
Net income | $ 4,930 | $ 3,424 |
Basic weighted average common shares (in shares) | 48,526 | 48,504 |
Potential common shares (in shares) | 2,800 | 3,809 |
Diluted weighted average common shares (in shares) | 51,326 | 52,313 |
Diluted earnings per share (in dollars per share) | $ 0.10 | $ 0.07 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
INCOME TAXES | ||
Effective income tax rates (as a percent) | 31.90% | 22.70% |
Pretax income | $ 7,238 | $ 4,432 |
SEGMENT AND GEOGRAPHICAL INFO_3
SEGMENT AND GEOGRAPHICAL INFORMATION (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022USD ($)segment | Mar. 31, 2021USD ($) | |
Segment and geographical information | ||
Number of segments | segment | 1 | |
Revenues | $ 72,563 | $ 66,571 |
Americas | ||
Segment and geographical information | ||
Revenues | 41,437 | 38,090 |
Europe | ||
Segment and geographical information | ||
Revenues | 23,463 | 22,742 |
Asia Pacific | ||
Segment and geographical information | ||
Revenues | $ 7,663 | $ 5,739 |
FINANCING ARRANGEMENTS AND LO_2
FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Details) | Mar. 10, 2020USD ($)installment | Mar. 31, 2022USD ($) | Dec. 31, 2021USD ($) | Mar. 09, 2020USD ($) |
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Outstanding borrowings | $ 73,400,000 | $ 74,500,000 | ||
Fair value of outstanding borrowing | $ 72,300,000 | $ 73,600,000 | ||
Debt Instrument, Valuation Technique [Extensible List] | us-gaap:ValuationTechniqueDiscountedCashFlowMember | |||
Debt Instrument, Measurement Input [Extensible List] | us-gaap:MeasurementInputDiscountRateMember | |||
Debt instrument, measurement input | 0.025 | 0.020 | ||
Eurodollar | ||||
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 | ||||
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 Credit Facility | ||||
FINANCING ARRANGEMENTS AND LONG-TERM DEBT | ||||
Maximum borrowing capacity | $ 54,000,000 | $ 30,000,000 | ||
Borrowings under the revolver | $ 0 | $ 0 |