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What changed in Information Services Group Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Information Services Group Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+247 added−229 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-10)

Top changes in Information Services Group Inc.'s 2023 10-K

247 paragraphs added · 229 removed · 177 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

70 edited+18 added−22 removed26 unchanged
Biggest changeOur Company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. We continue to believe that our vision will be realized through the acquisition, integration and successful operation of market leading brands within the data, analytics and advisory industry.
Biggest changeWe continue to believe that our vision will be realized through the acquisition, integration and successful operation of market-leading brands within the data, analytics and advisory industry. Our private and public sector clients continue to face significant technological, business and economic challenges that will fuel demand for the professional services we provide.
Our Services ISG 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. ISG supports both private and public sector organizations to transform and optimize their operational environments.
Our Services ISG specializes in digital transformation services, including sourcing advisory, automation, cloud and data analytics; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. ISG supports both private and public sector organizations to transform and optimize their operational environments.
We recognize the value of our intellectual property and vigorously defend it. As a result, the Company maintains strict policies and procedures regarding ownership, use and protection with all parties, including our employees. Clients We operate in over 20 countries and across numerous industries.
We recognize the value of our intellectual property and vigorously defend it. As a result, the Company maintains strict policies and procedures regarding ownership, use and protection of our intellectual property with all parties, including our employees. Clients We operate in over 20 countries and across numerous industries.
To meet these needs, we have formed two global client solution areas: ISG Digital, focused on developing technology, transformation, sourcing and digital solutions for clients, and ISG Enterprise, focused on helping clients manage change and optimize operations in such areas as finance, human resources (“HR”) and Procure2Pay. 5 Table of Contents Our core solutions are supported by ISG Research, with its extensive market analyses and provider evaluations, our ISG Network and Software Advisory services and our software platforms, including ISG GovernX®.
To meet these needs, we formed two global client solution areas: ISG Digital, focused on developing technology, transformation, sourcing and digital solutions for clients, and ISG Enterprise, focused on helping clients manage change and optimize operations in such areas as finance, human resources (“HR”) and Procure2Pay. 5 Table of Contents Our core solutions are supported by ISG Research, with its extensive market analyses and provider evaluations, our ISG Network and Software Advisory services and our software platforms, including ISG GovernX®.
We will consider and may pursue opportunities to enter into joint ventures and to buy or combine with other businesses. Our Proprietary Data Assets and Market Intelligence One of our core assets is the information, data, analytics, methodologies and other intellectual property the Company possesses.
We will consider and may pursue opportunities to enter joint ventures and to buy or combine with other businesses. Our Proprietary Data Assets and Market Intelligence One of our core assets is the information, data, analytics, methodologies and other intellectual property the Company possesses.
We are well-positioned as a third party, objective advisory group with no affiliation to the software providers. ISG will continue to invest in the digitization of these services, driving increased automation, greater profitability and even more value for our clients. · Consider Acquisition and Other Growth Opportunities. The business services, information and advisory market is highly fragmented.
We are well-positioned as a third party, objective advisory group with no affiliation to the software providers. ISG will continue to invest in the digitization of these services, driving increased automation, greater profitability and even more value for our clients. ● Consider Acquisitions and Other Growth Opportunities. The business services, information and advisory market is highly fragmented.
Competition Competition in the sourcing, data, information and advisory market is primarily driven by independence and objectivity, expertise, possession of relevant benchmarking data, breadth of service capabilities, reputation and price. We compete with other sourcing advisors, research firms, strategy consultants and sourcing service providers. A significant number of independent sourcing and advisory firms offer similar services.
Competition Competition in the sourcing, data, information and advisory market is primarily driven by independence and objectivity, expertise, possession of relevant benchmarking data, breadth of service capabilities, reputation and price. We compete with other sourcing advisors, research firms, strategy consultants and sourcing service providers. A significant number of independent sourcing and advisory firms offer similar services to us.
For the Governance pillar, ISG has a well-established set of policies, governing bodies and independent validation measures. ISG is governed on a day-to-day basis by our internal international executive board, which meets weekly. ISG also receives governance and support from an external board of directors.
For the Governance pillar, ISG has a well-established set of policies, governing bodies and independent validation measures. ISG is governed on a day-to-day basis by our internal international executive board, which meets weekly. ISG also receives governance and support from an external board of directors (“the Board of Directors”).
These technological challenges have only been intensified by the COVID-19 pandemic and the resulting remote or hybrid work environment and, therefore, present further opportunity for ISG to assist our private and public sector clients with digital transformation services.
These technological challenges have only been intensified by the post-COVID-19 pandemic remote or hybrid work environment and, therefore, present further opportunity for ISG to assist our private and public sector clients with digital transformation services.
These services include market intelligence, client retention programs, pursuit effectiveness, satisfaction benchmarking, go-to-market consulting and health checks. 4. ISG Platform: We see growth opportunities in tool-enabling the part of consulting that solves for standard problems.
These services include market intelligence, client retention programs, pursuit effectiveness, satisfaction benchmarking, go-to-market consulting and health checks. 6. ISG Platform: We see growth opportunities in tool-enabling the part of consulting that solves for standard problems.
Services include training advisory, analysis, strategy, development, delivery support and learning assessment. · Expand “Recurring Revenue Streams.” These include such annuity-based ISG offerings as ISG GovernX, Research, Software-as-a-Subscription, ISG Inform and the multi-year Public Sector contracts. All are characterized by subscriptions (i.e., renewal centric as opposed to project centric revenue streams) or multi-year contracts.
Services include training advisory, analysis, strategy, custom development, delivery support, learning software subscription models, learning administration, and learning assessment. ● Expand “Recurring Revenue Streams.” These include such annuity-based ISG offerings as ISG GovernX, ISG Research, Software-as-a-Subscription, ISG Inform and the multi-year Public Sector contracts. All are characterized by subscriptions (i.e., renewal-centric as opposed to project-centric revenue streams) or multi-year contracts.
We believe that our experience with outsourcing transactions and software implementation initiatives make us uniquely equipped to provide research insights and direct support to help our clients manage their transformational projects or act as a third-party administrator. We will continue to pursue opportunities to leverage our experience to make research and managed services an even greater revenue generator for us.
We believe that our experience with outsourcing transactions and software implementation initiatives makes us uniquely equipped to provide research insight and direct support to help our clients manage their transformational projects or act as a third-party administrator. We will continue to pursue opportunities to leverage our experience to make research and managed services an even greater revenue generator for us.
ISG combines deep subject matter expertise, market data and financial frameworks along with sourcing of technology and service providers to help organizations develop and execute HR technology strategies that are right for them. 3. Providers-as-a-Business (“PaaB”): Historically, ISG had targeted traditional service providers for these types of services, which included a combination of consulting and research solutions.
ISG combines deep subject matter expertise, market data and financial frameworks along with sourcing of technology and service providers to help organizations develop and execute HR technology strategies that are right for them. 5. Providers-as-a-Business: Historically, ISG had targeted traditional service providers for these types of services, which included a combination of consulting and research solutions.
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.
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.
As companies begin to recognize the importance of managing the post-sourcing transaction period, managed services have emerged as a revenue driver for the firm, with our offerings delivered through multi-year managed services contracts.
As companies begin to recognize the importance of managing the post-sourcing transaction period, managed services have emerged as a revenue driver for the Company, with our offerings delivered through multi-year managed services contracts.
Our purpose in the digital marketplace is to be a trusted advisor, guiding our clients through digital transformation toward practical innovation of their business models, leveraging strategic partners, emerging technology and thought leadership. Our digital services now span a volume of offerings and have become embedded as part of our traditional transaction services.
Our purpose in the digital marketplace is to be a trusted advisor, guiding our clients through digital transformation toward practical innovation of their business models, leveraging strategic partners, emerging technology and thought leadership. 6 Table of Contents Our digital services now span a volume of offerings and have become embedded as part of our traditional transaction services.
With each engagement we conduct, we enhance both the quantity and quality of the intellectual property we employ on behalf of our clients, thus providing a continuous, evolving and unique source of information, data and analytics. 9 Table of Contents This intellectual property is proprietary, and we rely on multiple legal and contractual provisions and devices to protect our intellectual property rights.
With each engagement we conduct, we enhance both the quantity and quality of the intellectual property we employ on behalf of our clients, thus providing a continuous, evolving and unique source of information, data and analytics. This intellectual property is proprietary, and we rely on multiple legal and contractual provisions and devices to protect our intellectual property rights.
The new data-analytics-as-a-solution offering is powered by ISG’s market-leading data repository—the industry’s most comprehensive, curated database of global IT, business process and engineering outsourcing contracts—paired with ISG’s patented IT price benchmarking, market cost intelligence and other analytical tools. We continue to develop and invest in our ISG Platform, which will help us drive recurring revenues. 5.
The new data-analytics-as-a-solution offering is powered by ISG’s market-leading data repository—a comprehensive, curated database of global IT, business process and engineering outsourcing contracts—paired with ISG’s patented IT price benchmarking, market cost intelligence and other analytical tools. We continue to develop and invest in our ISG Platform, which will help us drive recurring revenues. 7.
We believe we are well-positioned to leverage our leading market positions and strong brand recognition to expand through acquisitions and other growth opportunities. Acquiring firms with complementary services and products allows us to further develop and broaden our service offerings and domain expertise.
We believe we are well-positioned to leverage our leading market positions and strong brand recognition to expand through acquisitions and other growth opportunities. Acquiring firms with complementary services and products would allow us to further develop and broaden our service offerings and domain expertise.
The platform delivers easy integration with other enterprise applications, such as ServiceNow, and is tightly connected to ISG Research offerings, such as benchmarks, assessments and total-cost-of-ownership evaluations. In times of crisis, ISG GovernX clients can mitigate supply chain risks and ensure business continuity by reviewing and validating their providers’ business and IT continuity plans and procedures.
The platform delivers easy integration with other enterprise applications, such as ServiceNow, and is tightly connected to ISG Research offerings, such as benchmarks, assessments and total-cost-of-ownership evaluations. Additionally, ISG GovernX clients can mitigate supply chain risks and ensure business continuity by reviewing and validating their providers’ business and IT continuity plans and procedures.
In addition, we expect strong cash flow generation and a strong balance sheet to support the current financial strategy. · Strengthen Our Industry Expertise.
In addition, we expect our cash flow generation and a solid balance sheet to support the current financial strategy. · Strengthen Our Industry Expertise .
In the private sector, for example, we believe that companies will continue to face significant challenges associated with globalization and technological innovation, including the need to decrease operating costs, increase efficiencies, compete against new market entrants and evaluate and adopt increasing numbers of emerging and transformational technologies such as cloud computing and automation.
In the private sector, for example, we believe that companies will continue to face significant challenges associated with globalization and technological innovation, including the need to decrease operating costs, increase efficiencies, compete against new market entrants and evaluate and adopt increasing numbers of emerging and transformational technologies such as Generative AI.
While we have made progress in our workforce diversity representation, we seek to continually improve in this area. 10 Table of Contents ISG WorkLife We have also introduced ISG WorkLife, which is a series of progressive, best practice, next-generation HR offerings designed to improve the quality of our work-life experience, while helping us achieve our firm-wide objectives.
While we have made progress in our workforce diversity representation, we seek to continually improve in this area. ISG WorkLife We have also introduced ISG WorkLife, which is a series of progressive, best practice, Next-Gen HR offerings designed to improve the quality of our work-life experience, while helping us achieve our firm-wide objectives.
ISG FutureSource is a unique and comprehensive sourcing solution that helps enterprises and public sector organizations evaluate their business requirements, identify desired outcomes, fast-track the provider identification and selection process, collaborate with providers on developing the right solution, get to a signed contract and transition operations faster than ever before.
Our ISG Tango sourcing platform is a unique and comprehensive solution that helps enterprises and public sector organizations to quickly evaluate their business requirements, identify desired outcomes, fast-track the provider identification and selection process, collaborate with providers on developing the right solution, get to a signed contract and transition operations faster than before.
We also are building more industry-specific capabilities in such areas as banking, insurance and smart manufacturing. Every client engagement now passes through our dedicated Solution Hub to bring the best thinking, tools and capabilities to bear to solve every client challenge.
We also continue to build more industry-specific capabilities in such areas as banking, insurance and smart manufacturing. Every client engagement passes through our dedicated Solution Hub to bring the best thinking, tools and capabilities to bear to solve every client challenge.
HR Technology & Transformations: Advances in technology are transforming the business of HR. From intuitive and mobile self-service software to predictive analytics and integrated talent management suites, technological solutions are changing the way leaders acquire, develop and engage their employees. New applications, enhanced functionality and competition among software providers make it difficult to stay on top of this ever-evolving space.
From intuitive and mobile self-service software to predictive analytics and integrated talent management suites, technological solutions are changing the way leaders acquire, develop and engage their employees. New applications, enhanced functionality and competition among software providers make it difficult to stay on top of this ever-evolving space.
ISG Automation offers clients a full portfolio of services, including automation assessments and strategy, proof-of-concept deployments, implementation and integration of software bots and establishment of centers of excellence to scale automation, as well as training and managed services. 7 Table of Contents ● Expand Emerging Services .
ISG Automation offers clients a full portfolio of services, including automation and Generative AI assessments and strategy, proof-of-concept deployments, implementation and integration of software bots, and establishment of centers of excellence to scale automation, as well as training and managed services. ● Expand Emerging Services .
Averaging over 20 years of experience, our strategic consulting teams bring a wealth of industry and domain-specific knowledge and expertise to address our clients’ most complex transformational needs. · Strong Brand Recognition. ISG continues to gain marketplace awareness as a leading brand in our industry. ISG offers integrated solutions to our clients. · Proprietary Data Assets and Market Intelligence.
Averaging over 20 years of experience, our strategic consulting teams bring a wealth of industry and domain-specific knowledge and expertise to address our clients’ most complex transformational needs. · Strong Brand Recognition. ISG continues to gain marketplace awareness as a leading brand in our industry. ISG offers integrated solutions to our clients. · Global Reach.
Item 1. Business As used herein, unless the context otherwise requires, ISG, the registrant, is referred to in this Form 10-K annual report (“Form 10-K”) as the “Company,” “we,” “us” and “our.” Our Company Information Services Group, Inc. (Nasdaq: III) is a leading global technology research and advisory firm.
Item 1. Business As used herein, unless the context otherwise requires, ISG, the registrant, is referred to in this Annual Report on Form 10-K for the fiscal year ended December 31,2023 (“Form 10-K”) as the “Company,” “we,” “us” and “our.” Our Company Information Services Group, Inc. (Nasdaq: III) is a leading global technology research and advisory firm.
In 2022, most learning was virtual; there were over 700 digital certified professionals that participated in various sessions, devoting a total of more than 30,000 hours to learning and development. Available Information Our Internet address is www.isg-one.com . The content on our website is available for information purposes only.
In 2023, most learning was virtual; there were over 1,200 digital certified professionals that participated in various sessions, devoting a total of more than 45,000 hours to learning and development. ​ Available Information Our Internet address is www.isg-one.com . The content on our website is available for informational purposes only.
Our ISG Go Green program speaks to the Environmental pillar of ESG. This program seeks to reduce our carbon footprint via awareness and education initiatives that share green practices for ISG employees in both virtual and physical offices. Additionally, ISG is developing measurable carbon reduction best practices that align with our goals for sustainable business operations.
This program seeks to reduce our carbon footprint via awareness and education initiatives that share green practices for ISG employees in both virtual and physical offices. Additionally, ISG is developing measurable carbon reduction best practices that align with our goals for sustainable business operations.
We have also launched ISG Inform™ 2.0, an enhanced version of our data-as-a-service solution that provides benchmarking capability to track digital transformation and application development maturity and performance against industry peers.
We continue to invest in ISG Inform™ 2.0, an enhanced version of our data-as-a-service solution that provides benchmarking capability to track digital transformation and application development maturity and performance against industry peers.
We make available through our Internet website under the link titled “Investors” our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments or exhibits thereto, after we electronically file any such materials with the Securities and Exchange 11 Table of Contents Commission (the “SEC”).
We make available through our Internet website under the link titled “Investors” our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments or exhibits thereto, as soon as reasonably practicable after we electronically file any such materials with the Securities and Exchange Commission (the “SEC”).
We maintain procedures, policies and codes of conduct around ethical business practices, whistleblowing, suppliers, data protection, information security, privacy, confidentiality, employee comportment and travel. With regard to cybersecurity, we regularly provide training, reporting and scans in compliance with our ISO-27001 certifications and best practices. Every year, our employees attest to reviewing our global policies via digital signature.
We maintain procedures, policies and codes of conduct around ethical business practices, whistleblowing, suppliers, data protection, information security, privacy, confidentiality, employee comportment and travel. With regard to cybersecurity, we regularly provide training, reporting and scans in compliance with our ISO-27001 certifications and best practices.
Robotic Process and Cognitive Automation technology is fundamentally reshaping the way businesses work. Automation is increasingly enabling automated 24/7/365 execution of business processes at a fraction of the cost of human equivalents, as well as the dramatic improvements in process execution and cost models.
Robotic Process Automation coupled with Generative AI is fundamentally reshaping the way businesses work. Automation is increasingly enabling automated 24/7/365 execution of business processes at a fraction of the cost of human equivalents, as well as leading to dramatic improvements in process execution and cost models.
Integrated solutions are then delivered through our new ISG iFlex™ global delivery model, which enables us to rapidly deploy our resources to support clients, regardless of geography or time zone. Our Competitive Advantages We believe that the following strengths differentiate us from our competition: ● Independence and Objectivity .
Integrated solutions are then delivered through our ISG iFlex™ global delivery model, which enables us to rapidly deploy our resources to support clients, regardless of geography or time zone. Our Competitive Advantages We believe that the following strengths differentiate us from our competition: · Independence and Objectivity . We are not an information technology or business process outsourcing service provider.
Based in Stamford, Connecticut, ISG employs approximately 1,600 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. For more information, visit www.isg-one.com.
Based in Stamford, Connecticut, ISG employs over 1,500 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. For more information, visit www.isg-one.com. The content on our website is available for informational purposes only.
In 2021, ISG GovernX was enhanced with real-time third-party risk management capabilities. The new capabilities, including integrated data feeds and real-time alerts, are increasingly important as provider ecosystems continue to grow more complex, introducing more risk to the enterprise, and threats against supply-chain integrity become more diverse.
ISG GovernX includes real-time third-party risk management capabilities, including integrated data feeds and real-time alerts, which are increasingly important as provider ecosystems grow more complex, introducing more risk to the enterprise, and threats against supply-chain integrity become more diverse.
During periods of expansion or contraction, our services have helped organizations large and small, public or private, across the globe address their most complex operational issues. The functional domain experience of our experts and deep empirical data resources help clients better understand their strategic options.
During periods of expansion or contraction, our services have helped organizations of all sizes across the globe address their most complex operational issues. The functional domain experience of our experts and deep empirical data resources allows clients to better understand their strategic options.
We believe we set ourselves apart with our data repository of recent, comparable transactions and benchmarking data, our depth of experience and our sourcing and technology implementation expertise, all of which are critical to implementing and managing successful transformation projects for business and governments. Employees As of December 31, 2022, we employed 1,599 people worldwide.
We believe we set ourselves apart with our data repository of recent, comparable transactions and benchmarking data, our depth of experience and our sourcing and technology implementation expertise, all of which are critical to implementing and managing successful transformation projects for business and governments.
Our employees’ function within a collaborative community that welcomes varied ideas and styles. These diverse perspectives produce enhanced results for our clients and result in a preferred place to work. We exhibit our commitment to diversity and inclusion through our hiring practices, opportunities for learning and advancement and the distribution of rewards.
These diverse perspectives produce enhanced results for our clients and result in a preferred place to work. We exhibit our commitment to diversity and inclusion through our hiring practices, opportunities for learning and advancement and the distribution of rewards.
ISG Network Select: This offering helps streamline and simplify how enterprises build their network solutions. It enables ISG to better meet the growing demand for such leading-edge networking solutions as software-defined networking (SD-WAN, SD-LAN), SD security services, 5G mobility, unified communications-as-a-service (UCaaS) and call center-as-a-service (CCaaS) — all critical to enterprise digital transformation.
It enables ISG to better meet the growing demand for such leading-edge networking solutions as software-defined networking (SD-WAN, SD-LAN), SD security services, 5G mobility, unified communications-as-a-service (UCaaS) and call center-as-a-service (CCaaS) — which are all critical to enterprise digital transformation.
Some of the key offerings here include: ● ISG Cares , our enhanced volunteering program, which, among other things, provides employees paid time off to attend to charitable pursuits. ● ISG Academy , our global learning and development program. ● ISG Aspire , our global mentoring program. ● ISG iRefer , which allows the firm to attract talent through employee referrals, which earn referral bonuses. ● ISG iTime , which provides flexible paid time off arrangements for employees in certain countries.
Some of the key offerings here include: ● ISG Cares , our enhanced volunteering program, which, among other things, provides employees paid time off to attend to charitable pursuits. ● ISG Academy , our global learning and development program. ● ISG Aspire , our global mentoring program. ● ISG iRefer , which allows the Company to attract talent through employee referrals, for which employees may earn referral bonuses. ● ISG iTime , which provides flexible paid time off arrangements for employees in certain countries . ● ISG Brand Ambassador, which highlights and encourages our people’s community support and charitable pursuits while elevating the firms global brand. ​ We understand that employees have varied interests both in and outside of the workplace.
Our Strategy We intend to use our competitive strengths to develop new services and products, sustain our growth and strengthen our existing market position by pursuing the following strategies: · Preserve and Expand Our Market Share Positions.
We believe the above strengths are central to our ability to successfully advise and support our clients to address any business challenge. Our Strategy We intend to use our competitive strengths to develop new services and products, sustain our growth and strengthen our existing market position by pursuing the following strategies: · Preserve and Expand Our Market Share Positions.
Through efforts such as our Inclusion, Diversity, Equity and Awareness (IDEA) team and Women-In-Digital industry group, we are able to help in the identification and advancement of diverse talent.
Through efforts such as our Inclusion, Diversity, Equity and Awareness (IDEA) team and Women-In-Digital industry group, we are able to help in the identification and advancement of diverse talent. We strive to provide a culture where each employee is able to bring their whole self to work.
We have assembled a comprehensive and unique set of data, analytics and market intelligence built over more than 30 years of data collection and analysis, providing insight into the comparative cost and quality of a variety of operational alternatives. · Global Reach. We possess practical experience in global business operations, and we understand the significance of interconnected economies and companies.
We have assembled a comprehensive and unique set of data, analytics and market intelligence built over more than 30 years of data collection and analysis, providing insight into the comparative cost and quality of a variety of operational alternatives. ● Domain Expertise.
Enterprises can leverage the platform to deliver up to 30 percent more value from their outsourcing spend. ISG GovernX users can easily manage new contracts and proactive renewals, make timely amendments and handle contract terminations—all on one platform.
ISG GovernX leverages cognitive technology to automate the management of third-party supplier relationships, including contract and project lifecycles and risk management. Enterprises can leverage the platform to deliver more value from their outsourcing spend. ISG GovernX users can easily manage new contracts and proactive renewals, make timely amendments and handle contract terminations—all on one platform.
In its pursuit of the firm’s growth initiatives, we are committed to maintaining a strong financial position with flexibility and liquidity. We believe that maintaining a financial profile that supports an investment grade credit rating is important to this long-term strategy. The priorities for uses of available cash include payment of dividends, funding growth, repurchases of shares and debt reduction.
In our pursuit of the Company’s growth initiatives, we are committed to maintaining a strong financial position with flexibility and liquidity. The priorities for uses of available cash include payment of dividends, funding growth, repurchases of shares and debt reduction.
Digital Engineering: ISG has an opportunity to develop and scale a Digital Engineering capability that meets the growing need of enterprises to integrate information technology, operational technology and engineering technology. ISG has hired a global leader to grow this business, building on our experience in Engineering Product Lifecycle Management and Digital Thread.
ISG Digital Engineering: ISG has an opportunity to develop and scale a Digital Engineering capability that meets the growing need of enterprises to integrate information technology, operational technology and engineering technology.
We are seeking to drive our service portfolio and relationships with clients further into Digital Advisory Services, including Cloud Solutions, Automation, Business Advisory Services, Cybersecurity, Digital Engineering, Strategy, Data & Analytics, Transition and Organizational Change and Network Advisory.
We are seeking to drive our service portfolio and relationships with clients further into Digital Advisory Services, including Generative AI, Automation, Business Advisory Services, Strategy, Data & Analytics, Transition and Organizational Change and Network & Software Advisory. These are all areas in which we are investing additional focus to drive increased revenues and expanded relationships with clients.
The focus will be on creating repeatable methods used to drive growth of emerging services, including ISG Automation; HR Technology & Transformations; Providers-as-a-Business; ISG Platform; ISG Network Select™; ISG Hyperscaler Services; ISG Digital Engineering; ISG Cybersecurity and ISG Training-as-a-Service. 1. ISG Automation: ISG’s capabilities and service offerings include implementation services for Robotic Process and Cognitive Automation Technology.
The focus will be on creating repeatable methods used to drive growth of emerging services, including Generative AI; ISG Automation; ISG Network Select™; HR Technology & Transformations; Providers-as-a-Business; ISG Platform; ISG Digital Engineering; ISG Research; and ISG Training-as-a-Service. 1. ISG Generative AI: ISG is significantly influencing how our clients adopt Generative Artificial Intelligence (GenAI).
ISG Automation guides clients through the hurdles of adoption, ensuring the optimal future state with best-fit technologies. ISG Automation tailors programs to specific business needs and helps build governance that works inside the culture of our clients. The Automation market size is expected to continue to grow significantly over the next few years.
ISG Automation: ISG’s capabilities and service offerings include implementation services for Robotic Process and Cognitive Automation Technology. ISG Automation guides clients through the hurdles of adoption, ensuring the optimal future state with best-fit technologies. ISG Automation tailors programs to specific business needs and helps build governance that works inside the culture of our clients.
Advancements continue to be made to ‘digitize’ further our traditional services. For example, we have continued the modernization of our traditional sourcing services toward digital with the launch of ISG FutureSource™ which has brought agility and nimbleness to the process of sourcing, RFPs and contracting.
Advancements continue to be made to further ‘digitize’ our traditional services. For example, we continue to modernize our traditional sourcing services to bring agility, nimbleness and AI capability to the process of sourcing, RFPs and contracting.
Stockholders may request free copies of these documents including our Annual Report to Stockholders by writing to Information Services Group, Inc., 2187 Atlantic Street, Stamford, CT 06902, Attention: Humberto P. Alfonso, or by calling (203) 517-3100. Our annual and quarterly reports and other information statements are also available to the public through the SEC’s website at www.sec.gov .
Stockholders may request free copies of these documents, including our Annual Report to Stockholders, by writing to Information Services Group, Inc., 2187 Atlantic Street, Stamford, CT 06902, Attention: Michael A. Sherrick, or by calling (203) 517-3100.
Our ability to compete effectively depends upon a number of factors, including learning opportunities, compensation/benefits, work environment and career opportunities. To make this happen, we have certain programs, training, policies and practices in place including the following: Diversity/Inclusion ISG believes a key to our success is our value of diverse backgrounds, experiences and cultures.
To make this happen, we have certain programs, training, policies and practices in place, including the following: Diversity/Inclusion ISG believes a key to our success is our value of diverse backgrounds, experiences and cultures. Our employees function within a collaborative community that welcomes varied ideas and styles.
Environmental Social and Governance (ESG, formerly referred to as CSR) The ISG Environmental Social and Governance program was developed with corporate commitment and accountability on a global level. The program has oversight and executive support to drive real, positive change in alignment with our value and policies, ultimately enabling us to maximize impact and value.
The program has oversight and executive support to drive real, positive change in alignment with our value and policies, ultimately enabling us to maximize impact and value. Our ISG Go Green program speaks to the Environmental pillar of ESG.
Our resources in the Americas, Europe and Asia Pacific make us a truly global advisory firm able to consistently serve the strategic and implementation needs of our clients. We believe the above strengths are central to our ability to successfully advise and support our clients to address any business challenge.
We possess practical experience in global business operations, and we understand the significance of interconnected economies and companies. Our resources in the Americas, Europe and Asia Pacific make us a truly global advisory firm able to consistently serve the strategic and implementation needs of our clients.
Learning ISG’s success depends on the knowledge and productivity of its employees. To that end, the firm invests a significant amount of time and money into providing development opportunities. Our ISG Academy is robust in offering learning in such topics specific to the employee’s industry and functional areas, leadership and people management, certifications and software and technical skills, among others.
Our ISG Academy is robust in offering learning in such topics specific to the employee’s industry and functional areas, leadership and people management, certifications and software and technical skills, among others.
Our approximately 1,600 employees, located in over 20 countries with more than one-fourth in the United States, perform a variety of different roles. We are participants in the competitive research and advisory industries. Attracting, developing and retaining talented people in advisory, research and other positions is critical to executing on our strategy.
Employees at ISG are anchored in our core values, which include trust, integrity, respect, diversity, passion, entrepreneurship, balance and mentorship. Our more than 1,500 employees, located in over 20 countries with more than one-fourth in the United States, perform a variety of different roles. We are participants in the competitive research and advisory industries.
We understand that employees have varied interests both in and outside of the workplace. These programs, and others under ISG WorkLife, provide employees with the opportunity to pursue these activities. This allows us to attract and retain productive employees and enhance diverse perspectives.
These programs, and others under ISG WorkLife, provide employees with the opportunity to pursue these activities. This allows us to attract and retain productive employees and enhance diverse perspectives. 10 Table of Contents Environmental Social and Governance (ESG) The ISG Environmental Social and Governance program was developed with corporate commitment and accountability on a global level in mind.
We have strengthened our market-facing organization to drive increased revenue around 22 global industries: Automotive, Aerospace & Defense, Banking, Chemicals, Consumer Goods, Energy & Utilities, Financial Services, Government, Health Care, Insurance, Life Sciences, Manufacturing, Media & Entertainment, Metals & Mining, Pharma/Biotech/Medical Devices, Private Equity & M&A, Public Sector & Education, Retail, Technology & Service Providers, Telecommunications, Transportation & Logistics and Travel & Hospitality. · Aggressively Expand Our Market Focus.
We strive to continue to strengthen our market-facing organization to drive increased revenue around 9 global industries: Banking and Financial Services, Consumer Services, Energy and Utilities, Health Sciences, Insurance, Manufacturing, Media and Technology Software and Services, Private Equity and Public Sector. · Aggressively Expand Our Market Focus.
Our employee base includes executive management, service leads, partners, directors, advisors, analysts, technical specialists and functional support staff. We recruit advisors from service providers and consulting firms with direct operational experience. These advisors leverage extensive practical expertise derived from experiences in corporate leadership, consulting, research, financial analysis, contract negotiations and operational service delivery.
Employees As of December 31, 2023, we employed 1,518 people worldwide. 9 Table of Contents Our employee base includes executive management, service leads, partners, directors, advisors, analysts, technical specialists and functional support staff. We recruit advisors from service providers and consulting firms with direct operational experience.
Under ISG NEXT, we are pivoting from services to solutions to address our clients’ most pressing business challenges in two areas most important to them—their continuing digital transformation and getting the most from their digital investments.
The Company’s operating model is aimed at extending our market leadership, enhancing growth opportunities and driving significant value for all stakeholders. We provide services that address our clients’ most pressing business challenges in two areas most important to them—their continuing digital transformation and getting the most from their digital investments.
This enables us to maintain a trusted advisor relationship with our clients through our unbiased focus and ability to align our interests with those of our clients. ● Domain Expertise.
Rather, we are an independent, fact-based data, analytics and advisory firm with no material conflicting financial or other interests. This enables us to maintain a trusted advisor relationship with our clients through our unbiased focus and ability to align our interests with those of our clients. · Proprietary Data Assets and Market Intelligence.
Automation is fundamentally reshaping the world of Information Technology Outsourcing (“ITO”) and Business Process Outsourcing (“BPO”). Our solutions will work to optimize repetitive processes using ‘bots’ instead of human labor. ISG Automation will continue to be marketed by industry (e.g., claims processing for insurance) and by back-office functions (e.g., accounting). 2.
The size of the Automation market is expected to continue to grow significantly over the next few years. Automation is fundamentally reshaping the world of Information Technology Outsourcing and Business Process Outsourcing. Our solutions will work to optimize repetitive processes using ‘bots’ 7 Table of Contents instead of human labor.
Human Capital Management ISG strives to employ the brightest, most innovative people in the industry, so that we can provide world-class solutions to our clients. Employees at ISG are anchored in our core values, which include trust, integrity, respect, diversity, passion, entrepreneurship, balance and mentorship.
Our voluntary advisor turnover rate has ranged between 12% and 15% over the last three years. Human Capital Management ISG strives to employ the brightest, most innovative people in the industry, so that we can provide world-class solutions to our clients.
Clients get access to detailed and current data on their vendor and technology options, insights to help negotiate better pricing, and processes to accelerate next-generation networking solutions. 6. Growth Through Hyperscalers: Our cloud transformation capabilities have reached a level of maturity that allows us to explore new growth opportunities in this space.
Clients get access to detailed and current data on their vendor and technology options, insights to help negotiate better pricing, and processes to accelerate ISG Tango networking solutions. 4. HR Technology & Transformations: Advances in technology are transforming the business of HR.
These organizations are typically looking for longer-term training support to address the needs of an evolving workforce. ISG TaaS uses an agile approach with rapid content development tools to accelerate training content throughout.
Building on this success, ISG offers outsourced managed learning services for organizations with limited resources and growing demand for custom learning content and 8 Table of Contents digital learning platforms. These organizations are typically looking for longer-term training support to address the needs of an evolving workforce.
All employees are required to execute confidentiality, conflict of interest and intellectual property agreements as a condition of employment. There are no collective bargaining agreements covering any of our employees. Our voluntary advisor turnover rate has ranged between 11% and 15% over the last three years.
These advisors leverage extensive practical expertise derived from experiences in corporate leadership, consulting, research, financial analysis, contract negotiations and operational service delivery. All employees are required to execute confidentiality, conflict of interest and intellectual property agreements as a condition of employment. There are no collective bargaining agreements covering any of our employees.
Our private and public sector clients continue to face significant technological, business and economic challenges that will continue to fuel demand for the professional services we provide. We are focused on providing unique solutions that solve for key client problems.
We are focused on providing unique solutions that solve key client problems.
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The firm’s operating model, ISG NEXT, launched in the third quarter of 2020 and is aimed at extending our market leadership, enhancing growth opportunities and driving significant value for all stakeholders.
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It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K or any other filings. Our Company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services.
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We are not an information technology or business process outsourcing service provider. Rather, we are an independent, fact-based data, analytics and advisory firm with no material conflicting financial or other interests.
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ISG plans to expand resources and intellectual property (“IP”) around digitization.
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These are all areas in which we are investing additional focus to drive increased revenues and expanded relationships with clients. 6 Table of Contents · Continue to Develop Digital Cloud Competency. There is a nexus of distinct, yet complementary, technology trends that are creating a perfect storm of disruption in the market.
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ISG continues to expand its Supplier and Contract Management capabilities powered by the GovernX® platform, the market’s leading vendor compliance and risk management digital solution. This service provides clients a strategic and disciplined approach to managing supplier relationships and large contract portfolios.
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Among the most significant technology trends are the speed with which products get to market, large-scale digitization, the efficiency of the cloud and the immediacy with which new disruptors can become omnipresent.
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These services assist clients with improving supplier performance, reducing spend, mitigating third party risk, and managing/collaborating/innovating with their supplier base.
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We continue to see clear opportunities in the execution of large-scale digital transformation – helping enterprises in executing their transformations by using their large technology platform and partner ecosystems. Increasingly, clients are taking a more agile approach, working incrementally on continuous transformation to meet rapidly changing technology and business conditions.
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Based on ISG’s 25 years of managing relationships on behalf of our clients, we have a unique and robust dataset that enables ISG to partner with clients to deliver improvements to their business processes and to benchmark the performance of their operations to the broader market.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe also face risk from our third-party suppliers if they are affected by cyber security incident, which could result in their loss of service (which could be a significant component of our services to clients), exposure of ISG or client data or a potential backdoor into ISG systems and network.
Biggest changeWe also face risks related to our use of third-party suppliers if such suppliers are affected by a cybersecurity threat or incident, which could result in a reduction in or loss of their ability to service us (which could be a significant component of our services to clients), the exposure of ISG or client data or a potential backdoor into ISG’s systems and network. 18 Table of Contents We may be subject to claims for substantial damages by our clients arising out of disruptions to their businesses or inadequate service, and our insurance coverage may be inadequate.
Also, we could face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt our information technology systems in order to gain access to confidential information and client data. Such attacks could disrupt our business operations, cause us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information.
Also, we could face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt our information technology systems to gain access to confidential information and client data. Such attacks could disrupt our business operations, cause us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information.
Changes in these laws (including newly released interpretations of these laws by courts and regulatory bodies) may limit our data access, use and disclosure, and may require increased expenditures by us or may dictate that we may not offer certain types of services.
Changes in these laws (including newly released interpretations of these laws by courts and regulatory bodies) may limit our client data access, use and disclosure, and may require increased expenditures by us or may dictate that we may not offer certain types of services.
Additionally, we could incur liability if a process we manage for a client were to result in internal control failures or impair our client’s ability to comply with our own internal control requirements.
Additionally, we could incur liability if a process we manage for a client were to result in internal control failures or impair our client’s ability to comply with their own internal control requirements.
Some of our competitors have significantly more financial and marketing resources, larger professional staffs, closer client relationships, broader geographic presence or more widespread recognition than us. In addition, limited barriers to entry exist in the markets in which we do business. As a result, additional new competitors may emerge, and existing competitors may start to provide additional or complementary services.
Some of our competitors have significantly more financial and marketing resources, larger professional staffs, closer client relationships, broader geographic presences or more widespread recognition than us. In addition, limited barriers to entry exist in the markets in which we do business. As a result, additional new competitors may emerge, and existing competitors may start to provide additional or complementary services.
As a result of the substantial fixed costs associated with the debt obligations, we expect that: ● a decrease in revenues will result in a disproportionately greater percentage decrease in earnings; ● we may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase; ● we may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures; ● we may not have sufficient liquidity to respond to business opportunities, competitive developments and adverse economic conditions; and ● our results of operations will be adversely affected if interest rates increase because, based on our current outstanding borrowings in the amount of $79.2 million as of December 31, 2022, a 1% increase in interest rates would result in a pre-tax impact on earnings of approximately $0.8 million per year.
As a result of the substantial variable costs associated with the debt obligations, we expect that: ● a decrease in revenues will result in a disproportionately greater percentage decrease in earnings; ● we may not have sufficient liquidity to fund all of these variable costs if our revenues decline or costs increase; ● we may have to use our working capital to fund these variable costs instead of funding general corporate requirements, including capital expenditures; ● we may not have sufficient liquidity to respond to business opportunities, competitive developments and adverse economic conditions; and ● our results of operations will be adversely affected if interest rates increase because, based on our current outstanding borrowings in the amount of $79.2 million as of December 31, 2023, a 1% increase in interest rates would result in a pre-tax impact on earnings of approximately $0.8 million per year.
Our revenues and operating results may vary significantly from accounting period to accounting period due to factors including: ● fluctuations in revenues earned on contracts; ● commencement, completion or termination of engagements during any particular period; ● additions and departures of key advisors; ● transitioning of advisors from completed projects to new engagements; ● seasonal trends; ● introduction of new services by us or our competitors; ● changes in fees, pricing policies or compensation arrangements by us or our competitors; ● strategic decisions by us, our clients or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; ● global economic and political conditions and related risks, including acts of terrorism, war, such as the war in Ukraine, pandemics, such as COVID-19, inflation, slowing growth, rising interest rates and recession; and ● conditions in the travel industry that could prevent our advisors from traveling to client sites.
Our revenues and operating results may vary significantly from accounting period to accounting period due to factors including: ● fluctuations in revenues earned on contracts; ● commencement, completion or termination of engagements during any particular period; ● additions and departures of key advisors; ● transitioning of advisors from completed projects to new engagements; ● seasonal trends; ● introduction of new services by us or our competitors; ● changes in fees, pricing policies or compensation arrangements by us or our competitors; ● strategic decisions by us, our clients or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; ● global economic and political conditions and related risks, including acts of terrorism, war, such as the war in Ukraine and the conflict in the Middle East, pandemics, inflation, slowing growth, rising interest rates and recession; and ● conditions in the travel industry that could prevent our advisors from traveling to client sites.
Strategic and Operation Risks Our operating results have been, and may in the future be, adversely affected by worldwide economic conditions and credit tightening. Our results of operations are affected by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve.
Strategy and Operation Risks Our operating results have been, and may in the future be, adversely affected by worldwide economic conditions and credit tightening. Our results of operations are affected by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve.
We intend to continue to expand our global footprint in order to meet our clients’ needs. This may involve expanding into countries beyond those in which we currently operate. We may involve expanding into less-developed countries, which may have less political, social or economic stability and less-developed infrastructure and legal systems.
We intend to continue to expand our global footprint in order to meet our clients’ needs. This may involve expanding into countries beyond those in which we currently operate, including into less-developed countries that may have less political, social or economic stability and less-developed infrastructure and legal systems.
If one or more of our large clients terminate or significantly reduce their engagements or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, sizable receivable balances could be jeopardized if large clients fail to remain a going concern.
If one or more of our large clients terminate, significantly reduce their engagement or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, sizable receivable balances could be jeopardized if large clients fail to remain a going concern.
Our operating results are subject to the risks inherent in international business activities, including: ● tariffs and trade barriers; ● regulations related to customs and import/export matters; ● restrictions on entry visas required for our advisors to travel and provide services; ● tax issues, such as tax law changes and variations in tax laws as compared to the United States; ● cultural and language differences; ● an inadequate banking system; ● foreign exchange controls; ● restrictions on the repatriation of profits or payment of dividends; ● crime, strikes, riots, civil disturbances, pandemics, such as COVID-19, terrorist attacks and wars, such as the war in Ukraine; ● nationalization or expropriation of property; ● law enforcement authorities and courts that are inexperienced in commercial matters; and ● deterioration of political relations with the United States.
Our operating results are subject to the risks inherent in international business activities, including: ● tariffs and trade barriers; ● regulations related to customs and import/export matters; ● restrictions on entry visas required for our advisors to travel and provide services; ● tax issues, such as tax law changes and variations in tax laws as compared to the United States; ● cultural and language differences; ● an inadequate banking system; ● foreign exchange controls; ● restrictions on the repatriation of profits or payment of dividends; ● crime, strikes, riots, civil disturbances, pandemics, terrorist attacks and wars, such as the war in Ukraine and the conflict in the Middle East; ● nationalization or expropriation of property; ● law enforcement authorities and courts that are inexperienced in commercial matters; and ● deterioration of political relations with the United States.
In addition, there is an increasing public concern regarding data and consumer protection issues, with the result that the number of jurisdictions with data protection laws continues to increase and the scope of existing privacy laws and the data considered to be covered by such laws are expanding.
In addition, there is an increasing public concern regarding data and consumer protection issues, with the result that the number of jurisdictions with data protection laws continues to increase and the scope of existing privacy laws and the data considered to be covered by such laws keep expanding.
Risks in this section are grouped in the following categories: (1) risks related to outstanding debt; (2) risks related to acquisitions; (3) strategy and operation risks; (4) risks related to management and employees; (5) macroeconomic risks; (6) risks related to data, cybersecurity and confidential information; and (7) general risks.
Risks in this section are grouped in the following categories: (1) risks related to outstanding debt; (2) risks related to acquisitions; (3) strategy and operation risks; (4) risks related to management and employees; (5) macroeconomic risks; (6) risks related to data, cybersecurity and confidential information; and (7) general risk factors.
Companies that have already invested substantial resources in developing in-house information technology and business process functions may be particularly reluctant or slow to move to a sourcing solution that may make some of their existing personnel and infrastructure obsolete. Our engagements may be terminated, delayed or reduced in scope by clients at any time.
Companies that have already invested substantial resources in developing in-house information technology and business process functions may be particularly reluctant or slow to move to a sourcing solution that may make some of their existing personnel and infrastructure obsolete. 13 Table of Contents Our engagements may be terminated, delayed or reduced in scope by clients at any time.
For example, in connection with our international operations, we are subject to laws prohibiting certain payments to governmental officials, such as the Foreign Corrupt Practices Act. A failure to comply with applicable regulations could result in regulatory enforcement actions as well as substantial civil and criminal penalties assessed against us and our employees.
For example, in connection with our international operations, we are subject to laws prohibiting certain payments to governmental officials, such as the Foreign Corrupt Practices Act of 1977, as amended. A failure to comply with applicable regulations could result in regulatory enforcement actions as well as substantial civil and criminal penalties assessed against us and our employees.
We are often required to collect and store sensitive or confidential client data in order to perform the services we provide under our contracts. Many of our contracts do not limit our potential liability for breaches of confidentiality.
We are often required to collect and store sensitive or confidential client data to perform the services we provide under our contracts. Many of our contracts do not limit our potential liability for breaches of confidentiality.
When the factors, events and contingencies described below or elsewhere in this Form 10-K materialize there could be a material adverse impact on our business, prospects, results of operations, financial condition and cash flows, and could therefore have a potential negative effect on the trading price of our common stock.
When the factors, events and contingencies described below or elsewhere in this Form 10-K materialize, there could be a material adverse impact on our business, prospects, results of operations, financial condition and cash flows, any of which could have a potential negative effect on the trading price of our common stock.
The cost of our obtaining an amendment or waiver could be significant, and further, there can be no assurance that we would be able to obtain an amendment or waiver. If our lenders were unwilling to enter into an amendment or provide a waiver, all amounts outstanding under our credit facility would become immediately due and payable.
The cost of our obtaining an amendment or waiver could be significant, and further, there can be no assurance that we would be able to obtain an amendment or waiver. 12 Table of Contents If our lenders were unwilling to enter into an amendment or provide a waiver, all amounts outstanding under our credit facility would become immediately due and payable.
Although we seek to prevent, detect and investigate these network security incidents, and have taken steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective.
Although we seek to prevent, detect, and investigate cybersecurity threats and incidents, and have taken steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective.
While we were in compliance with these covenants as of December 31, 2022, there can be no assurance that we will remain in compliance in the future.
While we were in compliance with these covenants as of December 31, 2023, there can be no assurance that we will remain in compliance in the future.
Unauthorized disclosure of sensitive or confidential client data, whether through breach of our processes, systems or otherwise, could also damage our reputation and cause us to lose existing and potential clients. We may also be subject to civil actions and criminal prosecution by government or government agencies for breaches relating to such data.
Unauthorized disclosure of sensitive or confidential client data, whether through breach of our processes, systems or otherwise, could subject us to liability, damage our reputation and cause us to lose existing and potential clients. We may also be subject to civil actions and/or criminal prosecution by government or quasi-government agencies for breaches relating to such 19 Table of Contents data.
We derive a significant portion of our revenues from our largest clients and could be materially and adversely affected if we lose one or more of our large clients. Our 25 largest clients accounted for approximately 35% and 37% of revenue in 2022 and 2021, respectively.
We derive a significant portion of our revenues from our largest clients and could be materially and adversely affected if we lose one or more of our large clients. Our 25 largest clients accounted for approximately 33% and 35% of revenue in 2023 and 2022, respectively.
Risks Related to Management and Employees The loss of key executives could adversely affect our business. The success of our business is dependent upon the continued service of a relatively small group of key executives, including Mr. Connors, Chairman and Chief Executive Officer; Mr. Lavieri, Vice Chairman and President – ISG Americas and Asia Pacific; Mr.
Risks Related to Management and Employees The loss of key executives could adversely affect our business. The success of our business is dependent upon the continued service of a relatively small group of key executives, including Michael P. Connors, Chairman and Chief Executive Officer; Todd D. Lavieri, Vice Chairman and President – ISG Americas and Asia Pacific; Michael A.
Air travel, telecommunications and entry through international borders are all vital components of our business. If a pandemic, such as COVID-19, or terrorist attack were to occur, our business could be disproportionately impacted because of the disruption, including potential cancellation of ISG events. Further, conducting business abroad subjects us to increased regulatory compliance and oversight.
Air travel, telecommunications and entry through international borders are all vital components of our business. If a pandemic, military conflict, or terrorist attack were to occur, our business could be disproportionately impacted because of the disruption, including potential cancellation of ISG events. Further, conducting business abroad subjects us to increased regulatory compliance and oversight.
Alfonso, Executive Vice President, Chief Financial Officer; and Mr. Kucinski, Executive Vice President and Chief Human Resources Officer, among others. Although we currently intend to retain our existing management, we cannot assure that such individuals will remain with us for the immediate or foreseeable future.
Sherrick, Executive Vice President and Chief Financial Officer; and Thomas S. Kucinski, Executive Vice President and Chief Human Resources Officer, among others. Although we currently intend to retain our existing management, we cannot assure that such individuals will remain with us for the immediate or foreseeable future.
Failure to consistently meet service requirements of a client or errors made by our employees in the course of 18 Table of Contents delivering services to our clients could disrupt the client’s business and result in a reduction in revenues or a claim for damages against us.
Failure to consistently meet service requirements of a client or errors made by our employees while delivering services to our clients could disrupt the client’s business and result in a reduction in revenues or a claim for damages against us.
Macroeconomic Risks Our international operations expose us to a variety of risks that could negatively impact our future revenue and growth. Approximately 42% of our revenues for both 2022 and 2021, respectively, were derived from sales outside of the Americas.
Macroeconomic Risks Our international operations expose us to a variety of risks that could negatively impact our future revenue and growth. Approximately 39% of our revenues for 2023 and 42% of our revenue for 2022 were derived from sales outside of the Americas.
As the breadth and complexity of this infrastructure continues to grow, including as a result of the use of mobile technologies, social media and cloud-based services, the risk of security breaches and cyberattacks increases.
As the breadth and complexity of this infrastructure continues to grow, because of the use of mobile technologies, social media and cloud-based services, the risk of security breaches and cyberattacks increases.
Utilization of our consultants is affected by a number of factors, including: ● additional hiring of consultants because there is generally a transition period for new consultants; ● the number and size of client engagements; ● the unpredictability of the completion and termination of engagements; ● our ability to transition our consultants efficiently from completed engagements to new engagements; ● unanticipated changes in the scope of client engagements or unexpected terminations of client engagements; and ● our ability to maintain an appropriate level of consultants by forecasting the demand for our services. 14 Table of Contents We could lose money on our fixed-fee or capped-fee contracts.
Utilization of our consultants is affected by a number of factors, including: ● additional hiring of consultants because there is generally a transition period for new consultants; ● the number and size of client engagements; ● the unpredictability of the completion and termination of engagements; ● our ability to transition our consultants efficiently from completed engagements to new engagements; ● unanticipated changes in the scope of client engagements or unexpected terminations of client engagements; and 14 Table of Contents ● our ability to maintain an appropriate level of consultants by forecasting the demand for our services.
Our failure to comply with the covenants in our credit agreement could materially and adversely affect our financial condition and liquidity. Our credit agreement contains financial covenants requiring that we maintain, among other things, certain levels of debt coverage and fixed charges. Poor financial performance could cause us to be in default of these covenants.
Our failure to comply with the covenants in our credit agreement could materially and adversely affect our financial condition and liquidity. Our credit agreement contains financial covenants requiring that we maintain, among other things, certain leverage and interest coverage ratios. Poor financial performance could cause us to be in default of these covenants.
We could be liable to our clients for damages and subject to liability and our reputation could be damaged if our confidential information or client data is compromised. We may be liable to our clients for damages caused by disclosure of confidential information.
We could be subject to liability and our reputation could be damaged if our confidential information or client data is compromised through security breaches, cyberattacks or otherwise. We may be liable to our clients for damages caused by disclosure of confidential information or personal data.
We may not be able to identify, acquire or profitably manage additional businesses. If we pursue acquisition or investment opportunities, these potential risks could disrupt our ongoing business, result in the loss of key customers or personnel, increase expenses and otherwise have a material adverse effect on our business, results of operations and financial condition.
If we pursue acquisition or investment opportunities, these potential risks could disrupt our ongoing business, result in the loss of key customers or personnel, increase expenses and otherwise have a material adverse effect on our business, results of operations and financial condition.
The majority of the data we use to populate our databases comes from our client engagements. The insight sought by clients from us relates to the contractual data and terms, including pricing and costs, to which we have access in the course of assisting our clients in the negotiation of our sourcing agreements.
The insight sought by clients from us relates to the contractual data and terms, including pricing and costs, to which we have access while assisting our clients in the negotiation of our sourcing agreements.
Ransomware risk has increased significantly in recent years and presents a significant risk of financial extortion and loss of data. With the ISG NEXT operating model employees continue to work remotely or on a hybrid basis, which magnifies the importance of the integrity of our remote access security measures.
Ransomware risk has increased significantly in recent years and presents a significant risk of financial extortion and loss of data. Our operating model allows employees to continue to work remotely or on a hybrid basis, which magnifies the importance of the integrity of our remote access security measures. We have robust measures in place to address and mitigate cyber-related risks.
Our clients may decide at any time to abandon, postpone and/or reduce our involvement in an engagement. Our engagements can be terminated, or the scope of our responsibilities may be diminished, with limited advance notice.
Our clients may decide at any time to abandon, postpone and/or reduce our involvement in an engagement. Our engagements can be terminated, or the scope of our responsibilities may be diminished, with limited advance notice. If an engagement is terminated, delayed or reduced unexpectedly, the professionals working on the engagement could be underutilized until we assign them to other projects.
Auditing Standard No. 5 provides the professional standards and related performance guidance for auditors to attest to, and report on, management’s assessment of the effectiveness of internal control over financial reporting under 19 Table of Contents Section 404.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. Auditing Standard No. 5 provides the professional standards and related performance guidance for auditors to attest to, and report on, management’s assessment of the effectiveness of internal control over financial reporting under Section 404.
We are dependent on information technology networks and systems to securely process, transmit and store electronic information and to communicate among our locations around the world and with our people, clients, alliance partners and vendors.
We could have liability, or our reputation could be damaged, if we fail to protect client and/or our data from security breaches or cyberattacks. We are dependent on information technology networks and systems to securely process, transmit and store electronic information and to communicate among our locations around the world and with our people, clients, alliance partners and vendors.
In such a situation, it is unlikely that we would be able to fulfill our obligations under, repay the accelerated indebtedness or otherwise cover our fixed costs.
In such a situation, it is unlikely that we would be able to fulfill our obligations, repay the accelerated indebtedness or otherwise cover our fixed costs. As of December 31, 2023, the total principal outstanding under the revolving credit facility was $79.2 million.
Data is obtained through the course of our engagements with clients who agree to contractual provisions permitting us to consolidate and utilize on an aggregate basis such information. If we were unable to utilize key data from previous client engagements, our business, financial condition and results of operations could be adversely affected.
Data is obtained through the course of our engagements with clients who agree to contractual provisions permitting us to consolidate and utilize on an aggregate basis such information.
Our insurance coverage for breaches or mismanagement of such data may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us. We could have liability, or our reputation could be damaged, if we fail to protect client and/or our data from security breaches or cyberattacks.
Our insurance coverage for breaches or mismanagement of such data may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us. Client restrictions on the use of client data could adversely affect our activities. Most of the data we use to populate our databases comes from our client engagements.
On March 10, 2020, the Company amended and restated its senior secured credit facility (the “2020 Credit Agreement”) to include an $86.0 million term facility and to increase the revolving commitments per the revolving facility from $30.0 million to $54.0 million.
On February 22, 2023, the Company amended and restated its senior secured credit facility to increase the revolving commitments per the revolving facility (the “2023 Credit Agreement”) from $54.0 million to $140.0 million and eliminate its term loan.
General Risks Failure to maintain effective internal control over financial reporting could adversely affect our business and the market price of our common stock.
If we were unable to utilize key data from previous client engagements, our business, financial condition, and results of operations could be adversely affected. ​ General Risk Factors Failure to maintain effective internal control over financial reporting could adversely affect our business and the market price of our common stock.
Risks Related to Acquisitions We have risks associated with acquisitions or investments. Since our inception, we have expanded through acquisitions. In the future, we plan to pursue additional acquisitions and investments as opportunities arise. We may not be able to successfully integrate businesses that we acquire in the future without substantial expense, delays or other operational or financial problems.
We may not be able to successfully integrate businesses that we acquire in the future without substantial expense, delays or other operational or financial problems. We may not be able to identify, acquire or profitably manage additional businesses.
As part of our strategy, from time to time, we enter into fixed-fee contracts, in addition to contracts based on payment for time and materials with capped fees. Because of the complexity of many of our client engagements, accurately estimating the cost, scope and duration of a particular engagement can be a difficult task.
We could lose money on our fixed-fee or capped-fee contracts. As part of our strategy, from time to time, we enter into fixed-fee contracts, in addition to contracts based on payment for time and materials with capped fees.
If we fail to make accurate estimates, we could be forced to devote additional resources to these engagements for which we will not receive additional compensation.
Because of the complexity of many of our client engagements, accurately estimating the cost, scope and duration of a particular engagement can be a difficult task. If we fail to make accurate estimates, we could be forced to devote additional resources to these engagements for which we will not receive additional compensation.
We may be subject to claims for substantial damages by our clients arising out of disruptions to their businesses or inadequate service and our insurance coverage may be inadequate. Most of our service contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services.
Most of our service contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services.
Our operating results may fluctuate significantly from period to period as a result of factors outside of our control.
Accordingly, the termination or significant reduction in the scope of a single large engagement, or multiple smaller engagements, could harm our business results. Our operating results may fluctuate significantly from period to period as a result of factors outside of our control.
Such breaches could lead to shutdowns or disruptions of or damage to our systems and those of our clients, alliance partners and vendors and unauthorized disclosure of sensitive or confidential information, including personal data. Client restrictions on the use of client data could adversely affect our activities.
Such breaches could lead to shutdowns or disruptions of or damage to our systems and those of our clients, alliance partners and vendors and unauthorized disclosure of sensitive or confidential information, including personal data. In addition, Third Party Cyber Security Risk is a critical focus for us. All potential new suppliers go through our Data Protection Impact Assessment (“DPIA”) process.
ISG is continuing to monitor the development of the EU’s ePrivacy Regulation proposal and industry response and will determine whether to take further action, as needed, following its final adoption. To mitigate the risk and negative exposure of data outside ISG, we have put in place a data protection framework which includes policies, procedures, guidance and records.
To mitigate the risk and negative exposure of data outside ISG, we have put in place a data protection framework that includes policies, procedures, guidance, and records. This includes policies and procedures for rights and usage of personal and client data. We are exposed to risks related to cybersecurity.
Removed
As of December 31, 2022, the total principal outstanding under the term loan facility and revolving credit facility was $70.2 million and $9.0 million, respectively. ​ 12 Table of Contents On February 22, 2023, the Company entered into a third amended and restated senior secured credit facility comprising a $140.0 million revolving credit facility, amending and restating the 2020 Credit Agreement.
Added
Our variable rate indebtedness will subject us to interest rate risk, which could cause our annual debt service obligations to increase significantly.
Removed
If an engagement is terminated, delayed 13 Table of Contents or reduced unexpectedly, the professionals working on the engagement could be underutilized until we assign them to other projects. Accordingly, the termination or significant reduction in the scope of a single large engagement, or multiple smaller engagements, could harm our business results.
Added
Borrowing under our 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) Term SOFR, plus 1.0%), plus the applicable margin (as defined below) or (ii) Term SOFR (which is the Term SOFR screen rate for the relevant interest period plus a credit spread adjustment of 0.10%) as determined by the administrative agent, plus the applicable margin.
Removed
The EU’s General Data Protection Regulation (“GDPR”) has extra-territorial scope and substantial fines for breaches (up to 4% of global annual revenue or €20 million, whichever is greater). Additionally, compliance with the GDPR is resulting in operational costs to implement new procedures corresponding to new legal rights granted under the law but has had little direct impact on ISG.
Added
The applicable margin is adjusted quarterly based upon the Company’s consolidated leverage ratio. If interest rates increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our cash flows could be adversely affected.
Removed
This includes policies and procedures for rights and usage of personal and client data. ISG employs a Data Privacy Manager who works closely with a governing board made up of the Chief Financial Officer, Chief Human Resource Officer, Chief Information Officer, Chief Data and Analytics Officer, Chief Information Security Officer, Legal Counsel and Director of Corporate Compliance.
Added
An increase in debt service obligations under our variable rate indebtedness could affect our ability to make payments required under the terms of our credit facility. Risks Related to Acquisitions We have risks associated with acquisitions or investments. Since our inception, we have expanded through acquisitions. In the future, we plan to pursue additional acquisitions and investments as opportunities arise.
Removed
The Data Privacy Manager completes an internal audit annually and works with a specialist third party to complete one external Data Protection Compliance review annually. Data Protection and Privacy training is included in the mandatory Information Security and Privacy training module for all new joiners.
Added
As a global firm, ISG must comply with various international and domestic data privacy regulations such as (i) the EU and UK General Data Protection Regulation (“GDPR”), which has extra-territorial scope and substantial fines for breaches (up to 4% of global annual revenue or €20 million, whichever is greater), (ii) the California Consumer Privacy Act, which, unlike data privacy provisions enacted by other US states, covers individuals acting in a commercial or employment context not just as consumers, and (iii) the Australian Privacy Act, among others.
Removed
Training is updated and republished for completion by all employees and contractors on an annual basis. We are exposed to risks related to cybersecurity.
Added
In addition, the new India Digital Personal Data Protection Act 2023 (“DPDP”) is likely to come into force in 2024. Like the GDPR, the DPDP has extra-territorial reach. The DPDP shares many provisions with existing privacy laws, and ISG therefore anticipates that its existing processes already broadly align with the new law.
Removed
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems.
Added
However, like the GDPR, failure to comply with the DPDP may lead to substantial fines. ISG is continuing to monitor the development of the EU’s ePrivacy Regulation proposal and industry response and will determine whether to take further action, as needed, if it is adopted.
Added
Notwithstanding this, we continue to experience attack attempts against our environment. We have and continue to expect to invest in the security and resiliency of our networks and products and to enhance our internal controls and processes, which are designed to help protect our systems and infrastructure and the information they contain.
Added
These include timely detection of incidents through monitoring, training, incident response capabilities, and mitigating cyber and security risks to our data, systems, products, and services. However, given the complex, continuing and evolving nature of cyber and other security threats, these efforts may not be fully effective, particularly against previously unknown vulnerabilities that could go undetected for an extended period.
Added
This starts with an initial screening questionnaire. The questionnaire covers what personal data and client data is processed, whether the third party has any access requirements to our environment and how is data is transferred. From this, our security team assesses the third party, conducts further due diligence, and reviews contractual clauses.
Added
If the risk assessment identifies that the baseline Information Security & Privacy technical and organizational controls are not met, the business will be advised accordingly. The outcome of all DPIAs is recorded on the DPIA register.
Added
All new third parties processing personal data or client data are assessed to be either Tier 1, 2 or 3, with Tier 1 being the highest risk in terms of data processed or interactions to our environment from a cyber security threat perspective.
Added
Tier 1 and 2 third parties are recorded on our business-critical services register and reviewed annually, and we review the compliance documentation, such as latest ISO certifications, SOC2 reports and pen tests, of those Tier 1 and 2 third parties.
Added
Tier 3 third parties are recorded on the DPIA register, but no further due diligence is performed by the security team, as Tier 3 third parties process no client or personal data and have no access or integration to ISG’s network or systems.
Added
As part of our continuous improvement in our third-party risk management process, we plan to engage the services of a third-party risk monitoring services to monitor threat intelligence and known vulnerabilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+5 added−3 removed3 unchanged
Biggest changeThe following table details the repurchases that were made during the three months ended December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Approximate Dollar ​ ​ ​ ​ ​ ​ ​ Shares (or Units) ​ Value of Shares ​ ​ ​ Total Number of ​ ​ ​ ​ Purchased ​ That May Yet Be ​ ​ ​ Shares ​ Average ​ as Part of Publicly ​ Purchased Under ​ ​ ​ Purchased ​ Price Paid per ​ Announced Plans or Programs ​ the Plan or Programs ​ Period ​ (In thousands) ​ Share ​ (In thousands) ​ (In thousands) (1) ​ Oct 1 - Oct 31 4 ​ $ 4.76 4 ​ $ 7,246 ​ Nov 1 - Nov 30 9 ​ ​ 5.48 9 ​ ​ 7,199 ​ Dec 1 - Dec 31 9 ​ ​ 5.39 9 ​ ​ 7,152 ​ (1) On August 5, 2021, ISG Board of Directors approved a stock repurchase plan authorizing the Company to repurchase an aggregate of $25 million in shares of the Common Stock. 21 Table of Contents ​ Securities Authorized for Issuance under Equity Compensation Plan The following table lists information regarding outstanding options and shares reserved for future issuance under our Amended and Restated 2007 Equity and Incentive Award Plan (the “Incentive Plan”) and our Amended and Restated Employee Stock Purchase Plan (the “ESPP”) as of December 31, 2022.
Biggest changeThe following table details the repurchases that were made during the three months ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Numbers of Approximate Dollar ​ ​ ​ ​ ​ ​ ​ Shares (or Units) ​ Value of Shares ​ ​ Total Number of ​ ​ ​ ​ Purchased ​ That May Yet Be ​ ​ Shares ​ Average ​ as Part of Publicly ​ Purchased Under ​ ​ Purchased ​ Price Paid per ​ Announced Plans or Programs ​ the Plans or Programs Period (In thousands) ​ Share (In thousands) (In thousands) (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 1 - October 31 5 ​ $ 4.38 5 ​ $ 27,669 November 1 - November 30 ​ 117 ​ $ 4.33 117 ​ $ 27,163 December 1 - December 31 268 ​ $ 4.61 268 ​ $ 25,928 23 Table of Contents (1) On August 5, 2023, the Board of Directors approved a stock repurchase plan authorizing the Company to repurchase an aggregate of $25 million in shares of the common stock.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividends to Shareholders In May 2022, the ISG Board of Directors approved quarterly dividends of $0.04 per share of ISG common stock.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividends to Shareholders In May 2023, the Board of Directors approved quarterly dividends of $0.045 per share of ISG common stock.
The Company expects to pay a total cash dividend of $0.16 per share for the four quarters ending March 2023. These dividends are funded through cash flow from operations, available cash on hand and/or borrowings under our revolving credit facility.
The Company expects to pay a total cash dividend of $0.18 per share for the four quarters ending June 2024. These dividends are funded through cash flow from operations, available cash on hand and/or borrowings under our revolving credit facility.
As of December 31, 2022, there were 637 holders of record of ISG common stock. The actual number of stockholders is significantly greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
As of March 1, 2024, there were 647 holders of record of ISG common stock. The actual number of stockholders is significantly greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Market for Registrant’s Common Equi ty, Related Stockholder Matters and Issuer Purchases of Equity Securities The following table sets forth the high and low closing sales price of our common stock, as reported on The Nasdaq Stock Market LLC under the symbol “III” for the periods shown: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Quarter Ending High Low March 31, 2022 ​ $ 7.78 ​ $ 6.20 ​ June 30, 2022 ​ 6.96 ​ 5.52 ​ September 30, 2022 ​ 7.66 ​ 4.72 ​ December 31, 2022 ​ 5.75 ​ 4.26 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Quarter Ending High Low March 31, 2021 ​ $ 4.51 ​ $ 3.28 ​ June 30, 2021 ​ 6.06 ​ 4.30 ​ September 30, 2021 ​ 8.20 ​ 5.57 ​ December 31, 2021 ​ 9.56 ​ 7.14 ​ ​ On March 2, 2023, the last reported sale price for our common stock on The Nasdaq Stock Market was $5.33 per share.
Market for Registrant’s Common Equi ty, Related Stockholder Matters and Issuer Purchases of Equity Securities The following table sets forth the high and low closing sales price of our common stock, as reported on The Nasdaq Stock Market LLC under the symbol “III” for the periods shown: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Quarter Ending High Low March 31, 2023 ​ $ 5.62 ​ $ 4.63 ​ June 30, 2023 ​ 5.85 ​ 4.88 ​ September 30, 2023 ​ 5.48 ​ 4.33 ​ December 31, 2023 ​ 4.92 ​ 3.99 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Quarter Ending High Low March 31, 2022 ​ $ 7.78 ​ $ 6.20 ​ June 30, 2022 ​ 6.96 ​ 5.52 ​ September 30, 2022 ​ 7.66 ​ 4.72 ​ December 31, 2022 ​ 5.75 ​ 4.26 ​ ​ On March 1, 2024, the last reported sale price for our common stock on The Nasdaq Stock Market was $4.32 per share.
We anticipate to continue paying regular quarterly dividends on our common stock for the foreseeable future, the declaration, timing and amounts of any such dividends remain subject to the discretion of our Board of Directors. During the fiscal quarter and fiscal year ended December 31, 2022, we paid dividends and dividend equivalents of $2.0 million and $7.5 million, respectively.
We anticipate we will continue to pay regular quarterly dividends on our common stock for the foreseeable future, the declaration, timing and amounts of any such dividends remain subject to the discretion of our Board of Directors.
Issuer Purchases of Equity Securities The Company had approximately $7.2 million in aggregate available under its share repurchase program as of December 31, 2022.
The new share repurchase program will take effect upon completion of the Company’s current program, which had approximately $0.9 million remaining as of January 1, 2024. The Company had approximately $25.9 million in aggregate available under its share repurchase program as of December 31, 2023.
Removed
We have not issued any shares of our common stock to employees as compensation under a plan that has not been approved by our stockholders. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Securities ​ Weighted ​ Number of Securities ​ ​ ​ to be ​ Average ​ Remaining Available ​ ​ ​ Issued upon ​ Exercise Price ​ for Future Issuance ​ ​ ​ Exercise of ​ of Outstanding ​ under Equity Compensation ​ ​ ​ Outstanding ​ Options, ​ Plans (Excluding ​ ​ ​ Options, Warrants ​ Warrants and ​ Shares Reflected in ​ Plan Category ​ and Rights(1) ​ Rights(2) ​ Column (2)(3)) ​ Approved by Stockholders 3,820,728 ​ $ — 3,932,497 ​ Not Approved by Stockholders — ​ — — ​ Total 3,820,728 ​ $ — 3,932,497 ​ (1) Of the 3,820,728 shares listed in this column, none are stock options issued under the Incentive Plan, 3,820,728 are restricted stock units issued under the Incentive Plan, and none are options issued during the current offering period under the ESPP.
Added
During the fiscal quarter and fiscal year ended December 31, 2023, we paid dividends and dividend equivalents of $2.2 million and $8.7 million, respectively. Issuer Purchases of Equity Securities On August 1, 2023, the Board of Directors approved a new share repurchase authorization of an additional $25.0 million.
Removed
(2) The weighted-average exercise price includes outstanding options and RSUs, treating RSUs as stock awards with an exercise price of zero. (3) Includes 847,124 shares available for future issuance under the ESPP.
Added
On August 1, 2023, the Board of Directors approved a new stock repurchase plan authorizing the Company to repurchase an aggregate of an additional $25 million in shares of the Company’s common stock.
Removed
Also includes 3,085,373 shares that were available for grant under the Incentive Plan as options and SARs and also for restricted stock, RSUs or other awards that could provide to the grantee an opportunity to earn the full value of an underlying share (in other words, such earning opportunity is not limited to the appreciation in value of our stock following the grant of the award).
Added
STOCK PERFORMANCE GRAPH The following graph compares the 5 year cumulative total shareholder return on our common stock from December 31, 2018 through December 31, 2023, with the cumulative total return for the same period of (i) the Russell 2000 index and (ii) the Peer Group described below.
Added
The comparison assumes for the same period the investment of $100 on December 31, 2018 in our common stock and in each of the indices and in each case, assumes reinvestment of all dividends. *$100 invested on December 31, 2018 in stock or index, including reinvestment of dividends ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Measurement Periods ISG Russell 2000 Index Peer Group(a) December 31, 2019 ​ $ 59.67 ​ $ 125.52 ​ $ 107.65 ​ December 31, 2020 ​ $ 77.36 ​ $ 150.58 ​ $ 132.46 ​ December 31, 2021 ​ $ 182.10 ​ $ 172.90 ​ $ 138.63 ​ December 31, 2022 ​ $ 112.69 ​ $ 137.56 ​ $ 77.88 ​ December 31, 2023 ​ $ 119.63 ​ $ 160.85 ​ $ 66.61 ​ (a) The Peer Group consists of the following companies: American Software, Inc., Edigo, Inc., Forrester Research, Inc., Lesaka Technologies Inc., Repay Holding Corp., The Hackett Group, Tucows, Inc.
Added
The Peer Group is weighted by market capitalization. ​ ​ Item 6. [Reserved] ​ 24 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

51 edited+20 added−18 removed37 unchanged
Biggest changeWe 26 Table of Contents believe that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 2021 ​ ​ (in thousands) Net income $ 19,726 $ 15,529 Interest expense (net of interest income) ​ 2,968 ​ 2,200 Income taxes ​ 6,956 ​ 7,582 Depreciation and amortization ​ 5,368 ​ 5,331 Interest accretion associated with contingent consideration ​ 33 ​ 101 Acquisition-related costs (1) ​ 282 ​ 240 Severance, integration and other expense ​ 633 ​ 1,406 Foreign currency transaction gain ​ (170) ​ (44) Non-cash stock compensation ​ 7,460 ​ 6,467 Adjusted EBITDA ​ $ 43,256 ​ $ 38,812 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2022 2021 ​ ​ (in thousands) Net income $ 19,726 $ 15,529 Non-cash stock compensation ​ 7,460 ​ 6,467 Intangible amortization ​ ​ 2,323 ​ ​ 2,643 Interest accretion associated with contingent consideration ​ 33 ​ 101 Acquisition-related costs (1) ​ 282 ​ 240 Severance, integration and other expense ​ 633 ​ 1,406 Foreign currency transaction gain ​ (170) ​ (44) Tax effect (2) ​ (3,379) ​ (3,460) Adjusted net income ​ $ 26,908 ​ $ 22,882 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 2021 Net income per diluted share ​ $ 0.39 $ 0.30 Non-cash stock compensation ​ 0.15 ​ 0.12 Intangible amortization ​ 0.05 ​ 0.05 Interest accretion associated with contingent consideration ​ 0.00 ​ 0.00 Acquisition-related costs (1) ​ 0.00 ​ 0.01 Severance, integration and other expense ​ 0.01 ​ 0.03 Foreign currency transaction gain ​ 0.00 ​ 0.00 Tax effect (2) ​ (0.07) ​ (0.07) Adjusted net income per diluted share ​ $ 0.53 ​ $ 0.44 ________________________________________ (1) Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.
Biggest changeWe believe that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 ​ ​ (in thousands) Net income $ 6,154 $ 19,726 ​ $ 15,529 Plus: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense (net of interest income) ​ 5,693 ​ 2,968 ​ 2,200 Income taxes ​ 2,607 ​ 6,956 ​ 7,582 Depreciation and amortization ​ 6,258 ​ 5,368 ​ 5,331 Interest accretion associated with contingent consideration ​ 104 ​ 33 ​ 101 Acquisition-related costs (1) ​ 201 ​ 282 ​ 240 Severance, integration and other expense ​ 2,513 ​ 633 ​ 1,406 Account Receivables Reserves ​ ​ 4,822 ​ ​ — ​ ​ — Tax indemnity receivables ​ ​ 35 ​ ​ — ​ ​ — Foreign currency transaction loss (gain) ​ 158 ​ (170) ​ (44) Non-cash stock compensation ​ 9,132 ​ 7,460 ​ 6,467 Adjusted EBITDA ​ $ 37,677 ​ $ 43,256 ​ $ 38,812 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 ​ ​ (in thousands) Net income ​ $ 6,154 $ 19,726 ​ $ 15,529 Plus: ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-cash stock compensation ​ 9,132 ​ 7,460 ​ 6,467 Intangible amortization ​ ​ 3,164 ​ ​ 2,323 ​ ​ 2,643 Interest accretion associated with contingent consideration ​ 104 ​ 33 ​ 101 Acquisition-related costs (1) ​ 201 ​ 282 ​ 240 Account Receivables Reserves ​ ​ 4,822 ​ ​ — ​ ​ — Severance, integration and other expense ​ 2,513 ​ 633 ​ 1,406 Write-off of deferred financing costs ​ ​ 379 ​ ​ — ​ ​ — Foreign currency transaction loss (gain) ​ 158 ​ (170) ​ (44) Tax effect (2) ​ (6,551) ​ (3,379) ​ (3,460) Adjusted net income ​ $ 20,076 ​ $ 26,908 ​ $ 22,882 ​ 29 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 Net income per diluted share ​ $ 0.12 ​ $ 0.39 ​ $ 0.30 Non-cash stock compensation ​ 0.18 ​ 0.15 ​ 0.12 Intangible amortization ​ 0.06 ​ 0.05 ​ 0.05 Interest accretion associated with contingent consideration ​ 0.00 ​ 0.00 ​ 0.00 Acquisition-related costs (1) ​ 0.01 ​ 0.00 ​ 0.01 Account Receivables Reserves ​ ​ 0.10 ​ ​ — ​ ​ — Severance, integration and other expense ​ 0.05 ​ 0.01 ​ 0.03 Write-off of deferred financing costs ​ ​ 0.01 ​ ​ — ​ ​ — Foreign currency transaction loss (gain) ​ 0.00 ​ 0.00 ​ 0.00 Tax effect (2) ​ (0.13) ​ (0.07) ​ (0.07) Adjusted net income per diluted share ​ $ 0.40 ​ $ 0.53 ​ $ 0.44 ________________________________________ (1) Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.
Our digital services now span a volume of offerings and have become embedded as part of even our traditional transaction services. Digital enablement provides capabilities, digital insights and better engagement with clients and partners.
Our digital services now span a volume of offerings and have become embedded as part of our traditional transaction services. Digital enablement provides capabilities, digital insights and better engagement with clients and partners.
The variance from the U.S. statutory rate of 21.0% for the year ended December 31, 2022 was primarily caused by the impact of higher tax rates applicable on company earnings in foreign jurisdictions and non-deductible expenses for tax purposes in the United States.
The variance from the U.S. statutory rate of 21.0% for the year ended December 31, 2023 was primarily caused by the impact of higher tax rates applicable on company earnings in foreign jurisdictions and non-deductible expenses for tax purposes in the United States.
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.
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.
We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future. The Company has financial covenants underlying its debt which require a Debt to adjusted EBITDA ratio of 3.25. The Company was in compliance with its financial covenants under the 2020 Credit Agreement as of December 31, 2022.
We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future. The Company has financial covenants underlying its debt which require a debt to adjusted EBITDA ratio of 3.25. The Company was in compliance with its financial covenants under the 2023 Credit Agreement as of December 31, 2023.
The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business.
The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from 31 Table of Contents those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business.
Employee Retirement Plans For both fiscal years ended December 31, 2022 and 2021, we contributed $2.1 million, respectively, to our 401(k) plan (the “Savings Plan”) on a fully discretionary basis. These amounts were invested by the participants in a variety of investment options under an arrangement with a third-party asset manager.
Employee Retirement Plans For the fiscal years ended December 31, 2023 and 2022, we contributed $0.0 million and $2.1 million, respectively, to our 401(k) plan (the “Savings Plan”) on a fully discretionary basis. These amounts were invested by the participants in a variety of investment options under an arrangement with a third-party asset manager.
Since future events and their impact cannot be determined with certainty, the actual results may differ from estimates. Such differences may be material to the consolidated financial statements. 29 Table of Contents We believe the application of accounting policies, and the estimates inherently required therein, are reasonable.
Since future events and their impact cannot be determined with certainty, the actual results may differ from estimates. Such differences may be material to the consolidated financial statements. We believe the application of accounting policies, and the estimates inherently required therein, are reasonable.
See “Non-GAAP Financial Measures” below for information about our use of these non-GAAP financial measures, including our reasons for including these measures and reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure. NON-GAAP FINANCIAL MEASURES We use non-GAAP financial measures to supplement the financial information presented on a GAAP basis.
See “Non-GAAP Financial 28 Table of Contents Measures” below for information about our use of these non-GAAP financial measures, including our reasons for including these measures and reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure. NON-GAAP FINANCIAL MEASURES We use non-GAAP financial measures to supplement the financial information presented on a GAAP basis.
The incremental borrowing rate used to discount future cash flows was 6.3% and 2.0% for December 31, 2022 and December 31, 2021, respectively. 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 and interest rates.
The incremental borrowing rate used to discount future cash flows was 6.9% and 6.3% for December 31, 2023 and December 31, 2022, respectively. 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 and interest rates.
Other areas that could impact the business would also include natural disasters, pandemics, such as COVID-19, legislative and regulatory changes and capital market disruptions. We principally derive revenues from fees for services generated on a project-by-project basis.
Other areas that could impact the business would also include natural disasters, pandemics, wars, legislative and regulatory changes and capital market disruptions. We principally derive revenues from fees for services generated on a project-by-project basis.
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.
In addition, the Company is required to comply with a consolidated leverage ratio and consolidated interest 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 fair value of the Company's outstanding borrowings is approximately $76.5 million and $73.6 million as of December 31, 2022 and December 31, 2021, 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 fair value of the Company's outstanding borrowings is approximately $79.8 million and $76.5 million as of December 31, 2023 and December 31, 2022, 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.
We provide adjusted EBITDA (defined as net income, plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, acquisition-related costs, and severance, integration and other expense), adjusted net income (defined as net income, plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, acquisition-related costs, and severance, integration and other expense on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net of tax effect of the items set forth in the table below.
We provide adjusted EBITDA (defined as net income, plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, tax indemnity receivables, accounts receivables reserve, acquisition-related costs, and severance, integration and other expense), adjusted net income (defined as net income, plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, acquisition-related costs, accounts receivables reserves, write-off of deferred financing cost and severance, integration and other expense on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net of tax effect of the items set forth in the table below.
The Company’s financial statements include outstanding borrowings of $79.2 million and $74.5 million as of December 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 Company’s financial statements include outstanding borrowings of $79.2 million both as of December 31, 2023 and December 31, 2022, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy.
Founded in 2006, and based in Stamford, Connecticut, ISG employs approximately 1,600 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.
Founded in 2006, and based in Stamford, Connecticut, ISG employs over 1,500 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. For more information, visit www.isg-one.com.
The increase in revenue in the Americas was primarily attributable to an increase in our Advisory, Research, NaSa and GovernX service lines, partially offset by a decrease in our Automation service line.
The increase in revenue in the Americas was primarily attributable to an increase in our Consulting and Automation service lines. The slight decrease in revenue in Europe was primarily attributable to a decrease in our Advisory service line, partially offset by an increase in our Automation and Research service lines.
Our effective tax rate for the year ended December 31, 2022 was 26.1% compared to 32.8% for the year ended December 31, 2021.
Our effective tax rate for the year ended December 31, 2023 was 29.8% compared to 26.1% for the year ended December 31, 2022.
The revenue in Europe was flat with an increase in our Automation and GovernX service lines, being offset by a decrease in our Advisory, Research and NaSa service lines. The increase in revenue in Asia Pacific was primarily attributable to an increase in our NaSa, Advisory and GovernX service lines, partially offset by a decrease in our Research service line.
The decrease in revenue in Asia Pacific was primarily attributable to a decrease in our Advisory and NaSa service lines, partially offset by an increase in our Research service line.
Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. The volume of work performed for any particular client can vary widely from period to period.
Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing.
Net cash provided from operations was primarily attributable to our net income after adjustments for non-cash charges of approximately $34.1 million partially offset by $23.0 million use of working capital primarily attributable to a $14.0 million change in accounts receivables and contract assets, a $7.2 million change in accrued expenses and other liabilities, a $1.0 million change in prepaid expense and other assets, a $0.7 million change in accounts payables; and $0.1 million change in contract liabilities; ● treasury share repurchases of $12.1 million; ● payments related to tax withholding for stock-based compensation of $4.1 million; ● cash dividends paid to shareholders of $7.5 million; ● proceeds from revolving facility of $9.0 million; ● principal payments on borrowings of $4.3 million; ● payment of contingent consideration of $1.0 million; ● payment for Change 4 Growth acquisition of $3.5 million: ● capital expenditures for property, plant and equipment of $3.4 million; and ● proceeds from issuance of employee stock purchase plan shares of $0.9 million.
Net cash provided from operations was primarily attributable to our net income after adjustments for non-cash charges of approximately $25.5 million partially offset by $13.2 million use of working capital primarily attributable to a $6.7 million change in accounts receivables and contract assets, a $6.5 million change in prepaid expense and other assets, a $4.9 million change in accounts payables, partially offset by a $3.8 million change in accrued expenses and other liabilities; and $1.1 million change in contract liabilities; ● treasury share repurchases of $3.5 million; ● repayment of outstanding debt of $84.2 million; ● payments related to tax withholding for stock-based compensation of $2.7 million; ● cash dividends paid to shareholders of $8.7 million; ● proceeds from revolving facility of $84.2 million; ● payment of contingent consideration of $1.5 million; ● payment for Ventana acquisition of $1.0 million: 30 Table of Contents ● payments related to debt financing costs of $0.8 million; ● capital expenditures for property, plant and equipment of $3.4 million; and ● proceeds from issuance of employee stock purchase plan shares of $0.9 million.
For more information, visit www.isg-one.com. 22 Table of Contents Our strategy is to strengthen our existing market position and develop new services and products to support future growth plans. As a result, we are focused on growing our existing service model, expanding geographically, developing new industry sectors, productizing market data assets, expanding our managed services offerings and growing via acquisitions.
Our strategy is to strengthen our existing market position and develop new services and products to support future growth plans. As a result, we are focused on growing our existing service model, expanding geographically, developing new industry sectors, productizing market data assets, expanding our managed services offerings and growing via acquisitions.
The volume of billings and timing of collections and payments affect these account balances. 27 Table of Contents The following table summarizes our cash flows for the years ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2022 2021 ​ ​ (in thousands) ​ Net cash provided by (used in): ​ ​ ​ ​ ​ ​ ​ Operating activities $ 11,146 $ 41,942 ​ Investing activities ​ (6,873) ​ (2,320) ​ Financing activities ​ (18,941) ​ (34,125) ​ Effect of exchange rate changes on cash ​ (2,271) ​ (1,713) ​ Net (decrease) increase in cash, cash equivalents, and restricted cash ​ $ (16,939) ​ $ 3,784 ​ As of December 31, 2022, our liquidity and capital resources included cash, cash equivalents and restricted cash of $30.7 million compared to $47.6 million as of December 31, 2021, a net decrease of $16.9 million, which was primarily attributable to the following: ● our operating activities provided net cash of $11.1 million for the year ended December 31, 2022.
The following table summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2023 2022 2021 ​ ​ (in thousands) ​ Net cash provided by (used in): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities $ 12,272 $ 11,146 $ 41,942 ​ Investing activities ​ (4,433) ​ (6,873) ​ (2,320) ​ Financing activities ​ (16,198) ​ (18,941) ​ (34,125) ​ Effect of exchange rate changes on cash ​ 498 ​ (2,271) ​ (1,713) ​ Net (decrease) increase in cash, cash equivalents, and restricted cash ​ $ (7,861) ​ $ (16,939) ​ $ 3,784 ​ As of December 31, 2023, our liquidity and capital resources included cash, cash equivalents and restricted cash of $22.8 million compared to $30.7 million as of December 31, 2022, a net decrease of $7.9 million, which was primarily attributable to the following: ● our operating activities provided net cash of $12.3 million for the year ended December 31, 2023.
BUSINESS OVERVIEW Information Services Group, Inc. (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to over 900 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.
A trusted business partner to over 900 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.
Statutory and 401(k) plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers compensation and disability insurance. A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities.
Direct costs also include employee taxes, health insurance, workers compensation and disability insurance. 27 Table of Contents A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities.
Our accounting policies are more fully described in “Note 2—Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements.” We have identified revenue recognition as a critical accounting estimate: Revenue Recognition We recognize our revenues by applying the following five steps: (1) identifying the contract with the customer; (2) identifying the performance obligation(s) in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligation(s); and (5) recognizing revenue when (or as) the Company satisfies the performance obligation(s).
We have identified revenue recognition as a critical accounting estimate: Revenue Recognition We recognize our revenues by applying the following five steps: (1) identifying the contract with the customer; (2) identifying the performance obligation(s) in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligation(s); and (5) recognizing revenue when (or as) the Company satisfies the performance obligation(s).
This MD&A provides an analysis of our consolidated financial results and cash flows for 2022 and 2021 under the headings “Results of Operations,” “Non-GAAP Financial Presentation and Measures,” and “Liquidity and Capital Resources.” For a similar detailed discussion comparing 2021 and 2020, refer to those headings under Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2021.
This MD&A provides an analysis of our consolidated financial results and cash flows for 2023 and 2022 under the headings “Results of Operations,” “Non-GAAP Financial Presentation,” “Non-GAAP Financial Measures,” and “Liquidity and Capital Resources.” For a similar detailed discussion comparing 2022 and 2021, refer to those headings under Item 7.
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 or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent (as defined in the 2020 Credit Agreement), plus the applicable margin.
Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement: ● The revolving credit facility has a maturity date of February 22, 2028. ● 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) Term SOFR, plus 1.0%), plus the applicable margin (as defined below) or (ii) Term SOFR (which is the Term SOFR screen rate for the relevant interest period plus a credit spread adjustment of 0.10%) as determined by the administrative agent, plus the applicable margin.
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.
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.
CURRENT ENVIRONMENT Inflation rates and the adverse effect of interest rates have increased significantly in the past year. Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy. Our exposure from changes to interest rates also has not had a material impact.
Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy. Our exposure from changes to interest rates has impacted our business operations, financial performance and results of operations, as our interest expense has increased from $3.2 million in 2022 to $6.2 million in 2023.
Operating assets and liabilities consist primarily of accounts receivable and contract assets, prepaid expense and other assets, accounts payable, contract liabilities, accrued expenses and other liabilities.
Operating assets and liabilities consist primarily of accounts receivable and contract assets, prepaid expense and other assets, accounts payable, contract liabilities, accrued expenses and other liabilities. The volume of billings and timing of collections and payments affect these account balances.
Depreciation expenses are generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize some costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.
We also capitalize some costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system. We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives.
The contract periods range from a few months to in excess of a year. We also enter into arrangements for the sale of automation software licenses and related delivery of consulting or implementation services at the same time or within close proximity to one another.
We also enter into arrangements for the sale of automation 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 on-premise software, hybrid and software-as-a-service licenses, as well as other software-related services.
Our inability or failure to realize these offsets could adversely affect our business operations, financial performance and results of operations. EXECUTIVE SUMMARY ISG delivered another record performance in 2022. Coming off our best year ever, we elevated our results to new heights.
Our inability or failure to realize these offsets could adversely affect our business operations, financial performance and results of operations. EXECUTIVE SUMMARY 2023 was a largely successful year for ISG. We delivered another year of record revenues, at $291 million.
The increase in operating expenses was due primarily to higher travel and entertainment expenses of $3.3 million, compensation expenses of $3.0 million, event-related expenses of $1.5 million, non-cash stock compensation of $1.0 million, professional fees of $0.6 million, bad debt expenses of $0.5 million, occupancy expenses of $0.4 million, subscriptions fees of $0.3 million and computer expenses of $0.3 million.
The increase in operating expenses was due primarily to higher bad debt expense of $5.1 million (refer to Note 2 for details), license fees of $5.0 million, contract labor of $3.0 million, restructuring costs of $1.9 million, travel and entertainment expenses of $1.7 million, non-cash stock based compensation of $1.7 million, computer expenses of $1.0 million, professional fees of $0.7 million and conference expenses of $0.5 million.
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 and software 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.
For network and software 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 derive revenues based on negotiating reductions in network and software costs of companies with the entities’ 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.
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 and software costs of companies with the entities’ related service providers and providing other services such as audits of network and communication expenses and consultation for network architecture.
The cost increases were partially offset by lower contract labor of $4.2 million, changes in fair value of contingent consideration of $1.5 million, lower restructuring costs of $0.8 million and communication expenses of $0.4 million. Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and retirement plan contributions.
The cost increases were partially offset by lower compensation expenses of $2.4 million. Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and retirement plan contributions. Statutory and 401(k) plans are offered to employees as appropriate.
Revenue associated with events is recognized at the point of time at which the event occurs and is primarily comprised of sponsorships. Conversely, revenue associated with research subscriptions is recognized over time, as the customer accesses our data or related platforms.
Conversely, revenue associated with research subscriptions is recognized over time, as the customer accesses our data or related platforms. In addition, we sell research products for which the revenue is recognized at a point in time upon delivery to the client.
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.
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.
Because our billable personnel operate remotely or on client premises, all occupancy expenses are recorded as general and administrative. Depreciation and amortization expenses in 2022 and 2021 were $5.4 million and $5.3 million, respectively. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements.
Because our billable personnel operate remotely or on client premises, all occupancy expenses are recorded as general and administrative. Depreciation and amortization expenses in 2023 and 2022 were $6.3 million and $5.4 million, respectively. The increase of $0.9 million was primarily due to the acquisitions of Change 4 Growth and Ventana Research.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2022 COMPARED TO YEAR ENDED DECEMBER 31, 2021 Revenues Revenues are generally derived from fixed-fee contracts as well as engagements priced on a time and materials basis, which are recorded based on actual time worked as the services are performed.
ISG Tango™, we believe, will enable us to capture more unadvised transaction activity among the world’s largest enterprises (the G2000), and penetrate the underserved middle market, which spends an estimated $130 billion annually on technology and business services. ​ 26 Table of Contents RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022 Revenues Revenues are generally derived from fixed-fee contracts as well as engagements priced on a time and materials basis, which are recorded based on actual time worked as the services are performed.
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.
The results of any revisions in these estimates are reflected in the period in which they become known. 32 Table of Contents 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.
Geographical revenue information for the segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent Geographic Area ​ 2022 2021 Change Change ​ ​ ​ (in thousands) Americas ​ ​ $ 166,661 $ 160,181 $ 6,480 4 % Europe ​ ​ 89,908 ​ 90,256 ​ (348) (0) % Asia Pacific ​ ​ 29,698 ​ 27,395 ​ 2,303 8 % Total revenues ​ ​ $ 286,267 ​ $ 277,832 ​ $ 8,435 3 % Revenues increased by $8.4 million or approximately 3% in 2022.
Our foreign operations are subject to local government regulations and to the uncertainties of the economic and political conditions of those areas, and the revenue for our foreign operations is predominantly invoiced and collected in local currency. ​ Geographical revenue information for the segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent Geographic Area 2023 2022 Change Change ​ ​ (in thousands) Americas ​ $ 177,131 $ 166,661 $ 10,470 6 % Europe ​ 87,074 ​ 89,908 ​ (2,834) (3) % Asia Pacific ​ 26,849 ​ 29,698 ​ (2,849) (10) % Total revenues ​ $ 291,054 ​ $ 286,267 ​ $ 4,787 2 % ​ Revenues increased by $4.8 million or approximately 2% in 2023.
The applicable margin is adjusted quarterly based upon the Company’s quarterly leverage ratio. 28 Table of Contents ● The term loan is repayable in nineteen consecutive quarterly installments of $1,075,000 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.
Prior to the end of the first quarter-end following the closing of the credit facility, the applicable margin shall be a percentage per annum equal to 0.50% for the revolving loans maintained as Base Rate loans or 1.50% for the revolving loans maintained as Term SOFR loans. ● 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 dispositions 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.
Such software-related performance obligations include the sale of on-premise software, hybrid and software-as-a-service licenses, as well as other software-related services. Revenue associated with the software performance obligation is primarily recognized at the point at which the software is installed or access is granted.
Revenue associated with the software performance obligation is primarily recognized at the point at which the software is installed or access is granted. Revenue associated with events is recognized at the point of time at which the event occurs and is primarily comprised of sponsorships.
The translation of foreign currency revenues into U.S. dollars negatively impacted performance in Europe and Asia Pacific compared to the prior year by $12.7 million. 24 Table of Contents Operating Expenses The following table presents a breakdown of our operating expenses by functional category: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent Operating Expenses 2022 2021 Change Change ​ ​ ​ (in thousands) Direct costs and expenses for advisors ​ $ 169,650 $ 168,475 $ 1,175 1 % Selling, general and administrative ​ ​ 81,769 ​ 78,759 ​ 3,010 4 % Depreciation and amortization ​ ​ 5,368 ​ 5,331 ​ 37 1 % Total operating expenses ​ ​ $ 256,787 ​ $ 252,565 ​ $ 4,222 2 % ​ Total operating expenses increased by $4.2 million, or approximately 2%, for 2022.
Operating Expenses The following table presents a breakdown of our operating expenses by functional category: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent Operating Expenses 2023 2022 Change Change ​ ​ ​ (in thousands) Direct costs and expenses for advisors ​ $ 178,913 $ 169,650 $ 9,263 5 % Selling, general and administrative ​ ​ 91,271 ​ 81,769 ​ 9,502 12 % Depreciation and amortization ​ ​ 6,258 ​ 5,368 ​ 890 17 % Total operating expenses ​ ​ $ 276,442 ​ $ 256,787 ​ $ 19,655 8 % ​ Total operating expenses increased by $19.7 million, or approximately 8%, in 2023.
When we recognize revenues in advance of billing, those revenues are recorded as contract assets. When we invoice in advance of earning revenues, those amounts are recorded as contract liabilities. Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included elsewhere in this report. Item 7A.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included elsewhere in this report.
Goodwill related to acquisitions is not amortized but is subject to annual impairment testing. 25 Table of Contents Other Income (Expense), Net The following table presents a breakdown of other expense, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent Other income (expense), net ​ 2022 2021 Change Change ​ ​ ​ (in thousands) Interest income ​ $ 189 $ 142 $ 47 33 % Interest expense ​ ​ (3,157) ​ (2,342) ​ (815) (35) % Foreign currency transaction gain ​ ​ 170 ​ 44 ​ 126 286 % Total other income (expense), net ​ ​ $ (2,798) ​ $ (2,156) ​ $ (642) (30) % The total increase of $0.6 million was primarily the result of higher interest expense attributable to higher interest rates and higher borrowings outstanding.
Other Income (Expense), Net The following table presents a breakdown of other expense, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percent Other income (expense), net ​ 2023 2022 Change Change ​ ​ ​ (in thousands) Interest income ​ $ 497 $ 189 $ 308 163 % Interest expense ​ ​ (6,190) ​ (3,157) ​ (3,033) (96) % Foreign currency transaction gain ​ ​ (158) ​ 170 ​ (328) (193) % Total other expense, net ​ ​ $ (5,851) ​ $ (2,798) ​ $ (3,053) (109) % ​ The total increase of $3.1 million was primarily the result of higher interest expense attributable to higher interest rates, our higher debt balance and $0.4 million associated with the write-off of deferred financing costs.
On March 10, 2020, the Company amended and restated the 2020 Credit Agreement to include a $86.0 million term facility and to increase the revolving commitments per the revolving facility from $30.0 million to $54.0 million.
On February 22, 2023, the Company amended and restated its senior secured credit facility to increase the revolving commitments per the revolving facility (the “2023 Credit Agreement”) from $54.0 million to $140.0 million and eliminate its term loan. The material terms under the 2023 Credit Agreement are as follows.
These provisions typically 30 Table of Contents 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.
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.
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The Company’s 2022 success was built on our strong portfolio of services and solutions, our proven ISG NEXT operating model and our growing client base. We exceeded 900 clients for the first time, continuing a trend that has seen our client base grow significantly over the past few years. Nearly every one of our clients today is a digital business.
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“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2022. BUSINESS OVERVIEW Information Services Group, Inc. (Nasdaq: III) is a leading global technology research and advisory firm.
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Each is using digital technology to redefine how they operate, how they engage with customers, employees and business partners, and how they create new revenue streams through connected products and services.
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The volume of work performed for any particular client can vary widely from period to period. 25 Table of Contents CURRENT ENVIRONMENT Inflation rates and the adverse effect of interest rates have increased significantly in the past year.
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Our record revenue and profitability were the result of the operating efficiencies we derive from our ISG NEXT operating model, as well as our more profitable mix of products and services.
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A strong first nine months of the year was followed by a soft fourth quarter, due to lingering macro concerns that impacted demand for advisory services in the short term. Given that the overall IT and business services industry was down 6 percent for the year, we consider our topline growth of 2 percent to be a solid performance.
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Our iFlex delivery model, part of ISG NEXT, is generating strong utilization across the firm, allowing us to effectively manage our resources across borders and time zones and deliver greater value to our clients, mostly on a virtual basis.
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Our investments in our recurring-revenue businesses continue to pay off. For the year, we generated record recurring revenues of $125 million, up 16 percent, driven by our research and platforms businesses. Recurring revenue now represents 43 percent of our overall revenue, up 500 basis points from the prior year.
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Our strong financial position and operating results allowed us to return $24 million of capital to our shareholders in the form of dividends and share repurchases in 2022.
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This puts us on track to reach our previously announced target of $150 million in recurring revenues by the end of 2025. Our profitability, as measured by adjusted EBITDA, was $38 million, down from the prior year.
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It also allowed us to amend our existing $140 million credit agreement in early 2023, converting it to an all-revolver facility, with more favorable terms and an extended maturity date. 23 Table of Contents Looking ahead, we remain confident about our overall prospects for 2023 and beyond.
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Even as discretionary spending on advisory services slowed in toward the end of the year, we decided to retain much of our advisory team globally in anticipation of a rebound in 2024, while investing in training more than 1,200 of our employees in AI technology during the fourth quarter.
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We are investing now for when the overall market rebounds and demand surges forward again during the next big wave of digitalization. During 2022, we added more than 250 new professionals to the firm to support our future growth.
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We continue to expand our business for current and future growth—organically in areas like Cybersecurity, Training-as-a-Service (TaaS), and most recently Enterprise AI Advisory—and through acquisition, with our October purchase of Ventana Research.
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We also added new and important capabilities with our acquisitions of Change 4 Growth, an award-winning company specializing in transformational change for enterprises, and Agreemint, an automated contracting solution. Change 4 Growth is a perfect complement to our existing ISG Enterprise Change business and makes ISG a global leader in change management.
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A leading technology research business covering the $800 billion global software industry, Ventana Research gives us unmatched analyst coverage of software vendors—adding an important new pillar to our ISG Research portfolio and a strong complement to our Software Advisory business.
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This acquisition will expand the ISG Enterprise Change business by offering organizational change management (OCM), communications, training development and delivery, leadership development, mentoring, DEI programs, executive coaching and culture change. Agreemint, meanwhile, complements our ISG GovernX business. This AI-powered contract authorizing tool allows clients to negotiate better contracts and accelerate time to completion.
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With this addition, ISG is increasing its recurring revenue streams, while gaining more than 40 unique new clients and adding nearly two dozen talented research professionals to our roster of world-class technology analysts. Our acquisition of Ventana Research came one year to the day after we acquired Change 4 Growth, a leading change management firm, in 2022.
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Our clients continue to be the lifeblood of our firm. Our success requires our shared commitment to delivering value to them every day. And by all measures, we are doing a very good job of that. Environmental, Social and Governance (ESG) has become firmly entrenched in the culture of ISG.
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C4G has proven to be an excellent complement to our existing Enterprise Change business, delivering double-digit growth in 2023. ISG influences more than $200 billion in enterprise technology spending annually. We are using this market influence to lay the groundwork for the next big thing in technology: Artificial Intelligence, especially the most-talked-about technology development of our time—Generative AI.
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We are delighted our people, through individual and group efforts, are helping to lead the charge for better communities, a better environment and better opportunities for all. Throughout the pandemic years, we reinvented ISG and invested in our future. That has resulted in two back-to-back years of record-breaking financial results and a continuously growing client base.
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Through our new Enterprise AI Advisory business, we are identifying use cases for this exciting new technology and demonstrating where the greatest opportunities lie for ROI. That includes advising clients on performance improvements in their IT operations and business processes and how to design for, buy, build, run and govern AI products, infrastructure and services.
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It also has created a solid foundation for the future. With our ISG NEXT operating model and unmatched portfolio of solutions, advice, research and support, we are ready to take on all challenges and build on our momentum as a stronger, more valuable firm.
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Beyond AI, we are leveraging our global leadership in sourcing advisory to launch a platform solution called ISG Tango™ that puts our sourcing playbooks and intellectual property, contract exhibits, provider intelligence and other tools at the fingertips of our enterprise and provider clients and our advisors, to make the overall sourcing process more efficient and interactive.
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Our foreign operations are subject to local government regulations and to the uncertainties of the economic and political conditions of those areas, and the revenue for our foreign operations is predominantly invoiced and collected in local currency.
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The translation of foreign currency revenues into U.S. dollars was flat with a negative impact in Asia Pacific, being offset by a positive impact in Europe compared to the prior year.
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We amortize our intangible assets (e.g., client relationships and databases) over their estimated useful lives.
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See Note 4—Acquisition in the Notes to Consolidated Financial Statements for more regarding these acquisitions. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expenses are generally computed by applying the straight-line method over the estimated useful lives of assets.
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As of December 31, 2022 and December 31, 2021, there were $9.0 million and $0.0 million borrowings, respectively, under the revolver.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31 Item 8 . Financial Statements and Supplementary Data . 31 Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 31 Item 9A . Controls and Procedures 31 Item 9B .
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to financial market risks primarily related to changes in interest rates. A 100 basis point change in interest rates would result in an annual change in the results of operations of $0.8 million pre‑tax.
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Other Information 32 Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 32 PART III ​ ​ Item 10 . Directors and Executive Officers of the Registrant 32 Item 11 . Executive Compensation 32 Item 12 . Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters 32
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We do not enter into investments for trading or speculative purposes. ​ Interest Rate Risk ​ As of December 31, 2023, the Company had $79.2 million in total debt principal outstanding.
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Note 12 — Financing Arrangements and Long-Term Debt in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations. ​ All of the Company’s total debt outstanding as of December 31, 2023 was based on a floating base rate (SOFR – Secured Overnight Financing Rate) of interest, which potentially exposes the Company to increases in interest rates.
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However, due to our debt to EBITDA ratio of 2.4 times and forecasted rates from external banks, we believe that our total exposure is limited and is considered in our forecasted cash uses. ​ Foreign Currency Risk ​ A significant portion o f our revenues are typically derived from sales outside of the United States.
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Among the major foreign currencies in which we conduct business are the Euro, the British Pound and the Australian dollar. The reporting currency of our consolidated financial statements is the U.S. dollar.
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As the values of the foreign currencies in which we operate fluctuate over time relative to the U.S. dollar, the Company is exposed to both foreign currency translation and transaction risk. ​ Translation risk arises as our foreign currency assets and liabilities are translated into U.S. dollars because the functional currencies of our foreign operations are generally denominated in the local currency.
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Adjustments resulting from the translation of these assets and 33 Table of Contents liabilities are deferred and recorded as a component of stockholders’ equity. In 2023, the impact of foreign currency translation on our Statement of Stockholders’ Equity was $0.7 million.
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The translation of our foreign currency revenues and expenses historically has not had a material impact on our consolidated earnings because movements in and among the major currencies in which we operate tend to impact our revenues and expenses fairly equally.
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However, our earnings could be impacted during periods of significant exchange rate volatility, or when some or all of the major currencies in which we operate move in the same direction against the U.S. dollar. ​ Transaction risk arises when we enter into a transaction that is denominated in a currency that may differ from the local functional currency.
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As these transactions are translated into the local functional currency, a gain or loss may result, which is recorded in current period earnings.
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In 2023, the impact on revenues from foreign currency transactions was not material to our condensed consolidated financial statements. ​ Credit Risk ​ Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents and accounts receivable and contract assets.
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The majority of the Company’s cash and cash equivalents are with large investment-grade commercial banks. Accounts receivable and contract assets balances deemed to be collectible from customers have limited concentration of credit risk due to our diverse customer base and geographies. ​ ​

Other III 10-K year-over-year comparisons