Information Services Group Announces Fourth-Quarter and Full-Year 2023 Results
- Record full-year revenues of $291 million despite a soft fourth quarter
- Launches ISG Tango™, an innovative sourcing platform
- Record recurring revenues of $125 million, up 16 percent
- First-quarter dividend of $0.045 per share declared
- Sets first-quarter revenue guidance between $65 million and $67 million
- Expects an increase in client demand and AI adoption in 2024
- Fourth-quarter revenues down 11 percent from the prior year
- Operating loss of $3.5 million in the fourth quarter
- Net loss of $2.9 million in the fourth quarter
- Adjusted EBITDA down 47 percent in the fourth quarter
- Full-year adjusted EBITDA down 13 percent from the prior year
Insights
The reported fourth-quarter and full-year financials for Information Services Group (ISG) reveal a mixed performance with record annual revenues juxtaposed against a quarterly net loss. The recorded bad-debt reserve is a significant factor, which, if excluded, would have resulted in a net income rather than a loss for the quarter. It is vital to assess the company's ability to manage credit risk and the implications of such reserves on future profitability.
Despite a soft fourth quarter, the company's year-over-year revenue growth and the launch of ISG Tango™ indicate strategic initiatives to capture new market segments. The dividend declaration suggests confidence in the company's cash flow generation capabilities. However, the decrease in adjusted EBITDA margin year-over-year points to potential operational challenges or increased investments that investors should monitor closely.
ISG's positioning within the technology research and advisory sector is strengthened by the launch of ISG Tango™ and the Enterprise AI Advisory business. The expansion into the midmarket and the emphasis on AI capabilities suggest a strategic pivot towards high-growth areas. It's important to analyze market trends to understand the potential demand for such services and the competitive landscape.
Given the company's mention of a soft fourth quarter attributed to slower client decision-making, it's essential to evaluate the broader macroeconomic conditions and their impact on the IT and business services industry. The anticipated acceleration in client spending, possibly due to easing inflation and central bank policies, could be a key driver for ISG's performance in the upcoming quarters.
The financial results of ISG reflect underlying economic currents, with slower client decision-making indicating caution in the face of an uncertain macro environment. The anticipated improvement in client spending is contingent on macroeconomic factors such as inflation and central bank interest rate policies. The company's guidance for the first quarter of 2024 seems to reflect a cautiously optimistic outlook, factoring in these macroeconomic variables.
The impact of currency translation on reported revenues, although positive this quarter, is a reminder of the ongoing volatility in foreign exchange markets. Companies like ISG that operate globally must navigate these complexities, which can materially affect financial performance.
-
Reports fourth-quarter GAAP revenues of
$66 million -
Reports fourth-quarter net loss of
$2.9 million $0.06 $0.06 $4.8 million $0.8 million $0.02 -
Reports fourth-quarter adjusted EBITDA of
$6 million -
Generates
$9.7 million -
Achieves record full-year GAAP revenues of
$291 million $15 million $6 million $0.12 $38 million $20 million $0.40 - Launches ISG Tango™, a groundbreaking sourcing platform that improves transaction speed and efficiency, and opens new market opportunities
-
Declares first-quarter dividend of
$0.04 5 -
Sets first-quarter guidance: revenues between
$65 million $67 million $6.0 million $7.0 million
“ISG delivered record revenues of
“With the overall IT and business services industry down 6 percent for the full year, we consider our topline growth of 2 percent to be solid.”
Commenting on the firm’s profitability, Connors said: “Our adjusted EBITDA margin of 13 percent for the year was held back by a fourth quarter that was negatively impacted by slower client decision-making and our decision to retain advisory talent in anticipation of an uplift later this year.”
Speaking to the demand environment for 2024, Connors said: “We expect client spending to accelerate as the year progresses, especially if, as expected, inflation continues to cool and central banks respond with interest rate cuts. Our portfolio of services, platforms, research and enterprise AI capabilities should position ISG at the center of a resurgence in technology investments this year.”
ISG Launches Next-Gen Sourcing Platform
ISG today announced the launch of ISG Tango™, a groundbreaking sourcing platform that digitizes all elements of ISG’s market-leading sourcing transactions business to better serve clients, improve transaction speed and efficiency and allow ISG to expand into other market segments.
Developed over the past year, the platform solution, available to enterprise buyers and service providers, draws on ISG’s unmatched data assets, intellectual property and proprietary tools, powered by AI to automate contracting and provide real-time insights that streamline the entire transaction process and accelerate time to agreement.
“Speed, real-time transaction data, provider evaluations and other market insights are important to our clients as they navigate a more complex sourcing environment,” said Connors. “ISG Tango delivers on all counts and strengthens our position as the industry’s sourcing advisor of choice.”
Connors said ISG Tango will also allow ISG to penetrate the underserved midmarket. “We believe this platform-based offering, combined with our advisory expertise, will allow us to offer a level of sourcing advisory support that would be attractive and affordable to the midmarket, thereby expanding our revenue opportunities.”
The launch of ISG Tango comes two months after ISG announced the launch of its new Enterprise AI Advisory business, which offers clients a suite of services to help navigate the complexities and implications of adopting artificial intelligence at scale. ISG has already won significant AI engagements with several large clients, including major companies in the banking, entertainment, manufacturing and public sectors.
Fourth-Quarter 2023 Results
Reported revenues for the fourth quarter were
ISG reported a fourth-quarter operating loss of
During the fourth quarter, ISG recorded a
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the fourth quarter was
Fourth-quarter adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was
Full-Year 2023 Results
Reported revenues for the full-year were a record
ISG reported full-year operating income of
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the full year was
Full-year adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was
Other Financial and Operating Highlights
ISG generated
During the fourth quarter, ISG paid dividends of
2024 First-Quarter Revenue and Adjusted EBITDA Guidance
“We expect an acceleration in client demand throughout the course of this year, in anticipation of an improving macro environment and increasing AI adoption. For the first quarter, ISG is targeting revenues of between
Quarterly Dividend
The ISG Board of Directors declared a first-quarter dividend of
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, tax indemnity receivables, accounts receivables reserves, 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), adjusted net income per diluted share, adjusted EBITDA margin, 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 AI and 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 December 31 | Twelve Months Ended December 31, | |||||||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
| Revenues | $ |
66,186 |
|
$ |
74,167 |
|
$ |
291,054 |
|
$ |
286,267 |
|
||||
| Operating expenses | ||||||||||||||||
| Direct costs and expenses for advisors |
|
40,865 |
|
|
44,539 |
|
|
178,913 |
|
|
169,650 |
|
||||
| Selling, general and administrative |
|
27,276 |
|
|
20,963 |
|
|
91,271 |
|
|
81,769 |
|
||||
| Depreciation and amortization |
|
1,567 |
|
|
1,496 |
|
|
6,258 |
|
|
5,368 |
|
||||
| Operating (loss) income |
|
(3,522 |
) |
|
7,169 |
|
|
14,612 |
|
|
29,480 |
|
||||
| Interest income |
|
212 |
|
|
63 |
|
|
497 |
|
|
189 |
|
||||
| Interest expense |
|
(1,513 |
) |
|
(1,160 |
) |
|
(6,190 |
) |
|
(3,157 |
) |
||||
| Foreign currency transaction (loss) gain |
|
(118 |
) |
|
(78 |
) |
|
(158 |
) |
|
170 |
|
||||
| (Loss) Income before taxes |
|
(4,941 |
) |
|
5,994 |
|
|
8,761 |
|
|
26,682 |
|
||||
| Income tax (benefit) provision |
|
(2,072 |
) |
|
1,711 |
|
|
2,607 |
|
|
6,956 |
|
||||
| Net (loss) income | $ |
(2,869 |
) |
$ |
4,283 |
|
$ |
6,154 |
|
$ |
19,726 |
|
||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic |
|
48,810 |
|
|
48,128 |
|
|
48,609 |
|
|
48,175 |
|
||||
| Diluted |
|
49,838 |
|
|
49,769 |
|
|
50,175 |
|
|
50,420 |
|
||||
| (Loss) Earnings per share: | ||||||||||||||||
| Basic | $ |
(0.06 |
) |
$ |
0.09 |
|
$ |
0.13 |
|
$ |
0.41 |
|
||||
| Diluted | $ |
(0.06 |
) |
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.39 |
|
||||
| Information Services Group, Inc. | ||||||||||||||||
| Reconciliation from GAAP to Non-GAAP | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended December 31 | Twelve Months Ended December 31, | |||||||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
| Net (loss) income | $ |
(2,869 |
) |
$ |
4,283 |
|
$ |
6,154 |
|
$ |
19,726 |
|
||||
| Plus: | ||||||||||||||||
| Interest expense (net of interest income) |
|
1,301 |
|
|
1,097 |
|
|
5,693 |
|
|
2,968 |
|
||||
| Income taxes |
|
(2,072 |
) |
|
1,711 |
|
|
2,607 |
|
|
6,956 |
|
||||
| Depreciation and amortization |
|
1,567 |
|
|
1,496 |
|
|
6,258 |
|
|
5,368 |
|
||||
| Interest accretion associated with contingent consideration |
|
26 |
|
|
25 |
|
|
104 |
|
|
33 |
|
||||
| Acquisition-related cost (1) |
|
102 |
|
|
241 |
|
|
201 |
|
|
282 |
|
||||
| Severance, integration and other expense |
|
497 |
|
|
175 |
|
|
2,513 |
|
|
633 |
|
||||
| Account receivables reserves |
|
4,822 |
|
|
- |
|
|
4,822 |
|
|
- |
|
||||
| Tax indemnity receivable |
|
35 |
|
|
- |
|
|
35 |
|
|
- |
|
||||
| Foreign currency transaction loss (gain) |
|
118 |
|
|
78 |
|
|
158 |
|
|
(170 |
) |
||||
| Non-cash stock compensation |
|
2,380 |
|
|
2,028 |
|
|
9,132 |
|
|
7,460 |
|
||||
| Adjusted EBITDA | $ |
5,907 |
|
$ |
11,134 |
|
$ |
37,677 |
|
$ |
43,256 |
|
||||
| Net (loss) income | $ |
(2,869 |
) |
$ |
4,283 |
|
$ |
6,154 |
|
$ |
19,726 |
|
||||
| Plus: | ||||||||||||||||
| Non-cash stock compensation |
|
2,380 |
|
|
2,028 |
|
|
9,132 |
|
|
7,460 |
|
||||
| Intangible amortization |
|
812 |
|
|
743 |
|
|
3,164 |
|
|
2,323 |
|
||||
| Interest accretion associated with contingent consideration |
|
26 |
|
|
25 |
|
|
104 |
|
|
33 |
|
||||
| Acquisition-related cost (1) |
|
102 |
|
|
241 |
|
|
201 |
|
|
282 |
|
||||
| Account receivables reserves |
|
4,822 |
|
|
- |
|
|
4,822 |
|
|
- |
|
||||
| Severance, integration and other expense |
|
497 |
|
|
175 |
|
|
2,513 |
|
|
633 |
|
||||
| Write-off of deferred financing costs |
|
- |
|
|
- |
|
|
379 |
|
|
- |
|
||||
| Foreign currency transaction loss (gain) |
|
118 |
|
|
78 |
|
|
158 |
|
|
(170 |
) |
||||
| Tax effect (2) |
|
(2,802 |
) |
|
(1,052 |
) |
|
(6,551 |
) |
|
(3,379 |
) |
||||
| Adjusted net income | $ |
3,086 |
|
$ |
6,521 |
|
$ |
20,076 |
|
$ |
26,908 |
|
||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic |
|
48,810 |
|
|
48,128 |
|
|
48,609 |
|
|
48,175 |
|
||||
| Diluted |
|
49,838 |
|
|
49,769 |
|
|
50,175 |
|
|
50,420 |
|
||||
| Adjusted earnings per share: | ||||||||||||||||
| Basic | $ |
0.06 |
|
$ |
0.14 |
|
$ |
0.41 |
|
$ |
0.56 |
|
||||
| Diluted | $ |
0.06 |
|
$ |
0.13 |
|
$ |
0.40 |
|
$ |
0.53 |
|
||||
(1) |
Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities. |
|
(2) |
Marginal tax rate of |
| Information Services Group, Inc. | |||||||||||||||||
| Selected Financial Data | |||||||||||||||||
| Constant Currency Comparison | |||||||||||||||||
Three Months
|
Constant
|
Three Months Ended December 31, 2023 Adjusted |
Three Months Ended December 31, 2022 |
Constant currency impact |
Three Months Ended December 31, 2022 Adjusted |
||||||||||||
| Revenue | $ |
66,186 |
|
$ |
(1,077 |
) |
$ |
65,109 |
|
$ |
74,167 |
$ |
(330 |
) |
$ |
73,837 |
|
| Operating income | $ |
(3,522 |
) |
$ |
242 |
|
$ |
(3,280 |
) |
$ |
7,169 |
$ |
189 |
|
$ |
7,358 |
|
| Adjusted EBITDA | $ |
5,907 |
|
$ |
201 |
|
$ |
6,108 |
|
$ |
11,134 |
$ |
163 |
|
$ |
11,297 |
|
| Twelve Months Ended December 31, 2023 |
Constant currency impact |
Twelve Months Ended December 31, 2023 Adjusted |
Twelve Months Ended December 31, 2022 |
Constant currency impact |
Twelve Months Ended December 31, 2022 Adjusted |
||||||||||||
| Revenue | $ |
291,054 |
|
$ |
(5,483 |
) |
$ |
285,571 |
|
$ |
286,267 |
$ |
(5,539 |
) |
$ |
280,728 |
|
| Operating income | $ |
14,612 |
|
$ |
689 |
|
$ |
15,301 |
|
$ |
29,480 |
$ |
570 |
|
$ |
30,050 |
|
| Adjusted EBITDA | $ |
37,677 |
|
$ |
474 |
|
$ |
38,151 |
|
$ |
43,256 |
$ |
412 |
|
$ |
43,668 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240307213640/en/
Press:
Will Thoretz
+1 203 517 3119
will.thoretz@isg-one.com
Investor:
Michael Sherrick
+1 203 517 3104
michael.sherrick@isg-one.com
Source: Information Services Group, Inc.
FAQ
What were ISG's fourth-quarter GAAP revenues?
What was ISG's net loss in the fourth quarter?
What groundbreaking sourcing platform did ISG launch?
What was ISG's full-year revenue?
What was ISG's first-quarter dividend per share?
What is ISG's ticker symbol?
What was ISG's adjusted EBITDA in the fourth quarter?
How much cash did ISG generate from operations in the fourth quarter?
What was ISG's full-year adjusted EBITDA?
When is ISG's first-quarter dividend payable?
