Information Services Group Announces First-Quarter 2023 Results
-
Reports GAAP revenues of
$78 million -
Reports net income of
$3.5 million $0.07 $0.12 -
Reports record first-quarter adjusted EBITDA of
$11 million -
Announces ISG NEXT – Phase II, expected to result in additional EBITDA margin expansion of 200 bps and accelerated growth in recurring revenues to
$150 million -
Increases quarterly cash dividend by
12.5% , to$0.04 5 -
Sets second-quarter guidance: revenues between
$73 million $75 million $10 million $11 million
“We delivered our strongest revenue quarter ever, reflecting the trust and confidence our clients have in ISG to help them maximize the value of their digital investments,” said Michael P. Connors, chairman and CEO. “Our robust start to the year was the result of our focused execution, highlighted by our 17 percent topline growth in the
First-Quarter 2023 Results
Reported revenues for the first quarter were a record
ISG reported first-quarter operating income of
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the first quarter was
First-quarter adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was
Other Financial and Operating Highlights
ISG used
During the first quarter, ISG paid dividends of
New Operating Model: ISG NEXT – Phase II
ISG said it has launched Phase II of its ISG NEXT operating model, to extend the firm’s market leadership, enhance its growth opportunities, and drive significant value for all stakeholders.
Under Phase II, ISG expects by the end of 2025 to expand its adjusted EBITDA margin a further 200 basis points, to approximately 17 percent, and accelerate its recurring revenues to
“Our proven ISG NEXT operating model, launched two years ago, has enhanced the value we deliver to our clients and the financial performance we deliver for our shareholders,” said Connors. “Clients have benefited from our end-to-end and industry-specific solutions, and our borderless delivery network, ISG iFlex™, that enables us to rapidly deploy our global resources to solve any client challenge, regardless of geography or time zone. As a result, over the last two years, we grew our adjusted EBIDTA by more than 50 percent, our adjusted EBITDA margin by more than 30 percent or approximately 375 basis points, and our client base by more than 20 percent.
“Now we are moving on to Phase II of ISG NEXT, with a focus on accelerating the growth of our recurring revenue streams, especially in research and our platforms; further expanding our suite of digital solutions in such areas as cybersecurity, digital engineering and enterprise cloud, and taking advantage of growing market demand for our enterprise services including change management, human capital management and cost optimization.”
2023 Second-Quarter Revenue and Adjusted EBITDA Guidance
“For the second quarter, ISG is targeting revenues of between
Quarterly Dividend
The Board of Directors also approved a 12.5 percent increase in the quarterly dividend, from
“ISG remains committed to a disciplined capital allocation strategy that includes reinvesting in our business, managing our debt, returning capital to shareholders in the form of dividends and share repurchases, and supplementing our organic growth with strategic acquisitions to drive long-term shareholder value,” Connors said.
Conference Call
ISG has scheduled a call for 9 a.m.,
Forward-Looking Statements
This communication contains “forward-looking statements” which represent the current expectations and beliefs of management of ISG concerning future events and their potential effects. Statements contained herein including words such as “anticipate,” “believe,” “contemplate,” “plan,” “estimate,” “target,” “expect,” “intend,” “will,” “continue,” “should,” “may,” and other similar expressions, are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future results and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Those risks relate to inherent business, economic and competitive uncertainties and contingencies relating to the businesses of ISG and its subsidiaries including without limitation: (1) failure to secure new engagements or loss of important clients; (2) ability to hire and retain enough qualified employees to support operations; (3) ability to maintain or increase billing and utilization rates; (4) management of growth; (5) success of expansion internationally; (6) competition; (7) ability to move the product mix into higher margin businesses; (8) general political and social conditions such as war, political unrest and terrorism; (9) healthcare and benefit cost management; (10) ability to protect ISG and its subsidiaries’ intellectual property or data and the intellectual property or data of others; (11) currency fluctuations and exchange rate adjustments; (12) ability to successfully consummate or integrate strategic acquisitions; (13) outbreaks of diseases, including coronavirus, or similar public health threats or fear of such an event; and (14) engagements may be terminated, delayed or reduced in scope by clients. Certain of these and other applicable risks, cautionary statements and factors that could cause actual results to differ from ISG’s forward-looking statements are included in ISG’s filings with the
Non-GAAP Financial Measures
ISG reports all financial information required in accordance with
ISG provides 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, write-off of deferred financing costs, and severance, integration and other expense, on a tax-adjusted basis), adjusted net income per diluted share, adjusted EBITDA margin, gross-debt-to-adjusted-EBITDA ratio and selected financial data on a constant currency basis which are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations, which management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by ISG to evaluate the Company’s business strategies and management’s performance.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our current and prior-periods local currency financial results using the same point in time exchange rates and then compare the adjusted current and prior period results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP, nor should such amounts be considered in isolation.
Management believes this information facilitates comparison of underlying results over time. Non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure. Non-GAAP measures are provided as additional information and should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the forward-looking non-GAAP estimates contained herein to the corresponding GAAP measures is not being provided, due to the unreasonable efforts required to prepare it.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in
| Information Services Group, Inc. | |||||||||||||||
| Condensed Consolidated Statement of Income and Comprehensive Income | |||||||||||||||
| (unaudited) | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| Three Months Ended March 31, | |||||||||||||||
2023 |
2022 |
||||||||||||||
| Revenues | $ |
78,486 |
|
$ |
72,563 |
|
|||||||||
| Operating expenses |
|
||||||||||||||
| Direct costs and expenses for advisors |
|
49,169 |
|
|
43,955 |
|
|||||||||
| Selling, general and administrative |
|
20,670 |
|
|
19,587 |
|
|||||||||
| Depreciation and amortization |
|
1,597 |
|
|
1,289 |
|
|||||||||
| Operating income |
|
7,050 |
|
|
7,732 |
|
|||||||||
| Interest income |
|
84 |
|
|
45 |
|
|||||||||
| Interest expense |
|
(1,736 |
) |
|
(563 |
) |
|||||||||
| Foreign currency transaction (loss) gain |
|
(194 |
) |
|
24 |
|
|||||||||
| Income before taxes |
|
5,204 |
|
|
7,238 |
|
|||||||||
| Income tax provision |
|
1,713 |
|
|
2,308 |
|
|||||||||
| Net income | $ |
3,491 |
|
$ |
4,930 |
|
|||||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic |
|
48,438 |
|
|
48,526 |
|
|||||||||
| Diluted |
|
50,288 |
|
|
51,326 |
|
|||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ |
0.07 |
|
$ |
0.10 |
|
|||||||||
| Diluted | $ |
0.07 |
|
$ |
0.10 |
|
|||||||||
| Information Services Group, Inc. | ||||||||||||||||
| Reconciliation from GAAP to Non-GAAP | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||
2023 |
2022 |
|||||||||||||||
| Net income | $ |
3,491 |
|
$ |
4,930 |
|
||||||||||
| Plus: | ||||||||||||||||
| Interest expense (net of interest income) |
|
1,652 |
|
|
518 |
|
||||||||||
| Income taxes |
|
1,713 |
|
|
2,308 |
|
||||||||||
| Depreciation and amortization |
|
1,597 |
|
|
1,289 |
|
||||||||||
| Interest accretion associated with contingent consideration |
|
25 |
|
|
- |
|
||||||||||
| Acquisition-related costs |
|
- |
|
|
10 |
|
||||||||||
| Severance, integration and other expense |
|
266 |
|
|
110 |
|
||||||||||
| Foreign currency transaction (gain) loss |
|
194 |
|
|
(24 |
) |
||||||||||
| Non-cash stock compensation |
|
2,042 |
|
|
1,503 |
|
||||||||||
| Adjusted EBITDA | $ |
10,980 |
|
$ |
10,644 |
|
||||||||||
| Net income | $ |
3,491 |
|
$ |
4,930 |
|
||||||||||
| Plus: | ||||||||||||||||
| Non-cash stock compensation |
|
2,042 |
|
|
1,503 |
|
||||||||||
| Intangible amortization |
|
794 |
|
|
528 |
|
||||||||||
| Interest accretion associated with contingent consideration |
|
25 |
|
|
- |
|
||||||||||
| Acquisition-related costs |
|
- |
|
|
10 |
|
||||||||||
| Severance, integration and other expense |
|
266 |
|
|
110 |
|
||||||||||
| Write-off of deferred financing costs |
|
379 |
|
|
- |
|
||||||||||
| Foreign currency transaction (gain) loss |
|
194 |
|
|
(24 |
) |
||||||||||
| Tax effect (1) |
|
(1,184 |
) |
|
(681 |
) |
||||||||||
| Adjusted net income | $ |
6,007 |
|
$ |
6,376 |
|
||||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic |
|
48,438 |
|
|
48,526 |
|
||||||||||
| Diluted |
|
50,288 |
|
|
51,326 |
|
||||||||||
| Adjusted earnings per share: | ||||||||||||||||
| Basic | $ |
0.12 |
|
$ |
0.13 |
|
||||||||||
| Diluted | $ |
0.12 |
|
$ |
0.12 |
|
||||||||||
(1) Marginal tax rate of |
||||||||||||||||
| Information Services Group, Inc. | |||||||||||||||
| Selected Financial Data | |||||||||||||||
| Constant Currency Comparison | |||||||||||||||
Three Months
|
Constant
|
Three Months
|
Three Months
|
Constant
|
Three Months
|
||||||||||
| Revenue | $ |
78,486 |
$ |
(1,211 |
) |
$ |
77,275 |
$ |
72,563 |
$ |
(3,261 |
) |
$ |
69,302 |
|
| Operating income | $ |
7,050 |
$ |
140 |
|
$ |
7,190 |
$ |
7,732 |
$ |
(296 |
) |
$ |
7,436 |
|
| Adjusted EBITDA | $ |
10,980 |
$ |
119 |
|
$ |
11,099 |
$ |
10,644 |
$ |
(363 |
) |
$ |
10,281 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230508005486/en/
Press Contact:
Will Thoretz
+1 203 517 3119
will.thoretz@isg-one.com
Investor Contact:
Bert Alfonso
+1 203 517 3104
bert.alfonso@isg-one.com
Source: Information Services Group, Inc.
