Information Services Group Announces Second-Quarter 2024 Results

Rhea-AI Summary

Information Services Group (ISG) (Nasdaq: III) reported its Q2 2024 financial results, showing a 14% decrease in revenues to $64.3 million compared to the previous year. The company's net income was $2.0 million, with GAAP EPS of $0.04 and adjusted EPS of $0.08. ISG generated $2.2 million in cash from operations and declared a Q3 dividend of $0.045 per share.

Despite client delays in new initiatives, ISG's pipeline remains strong. The company's AI-powered ISG Tango platform now exceeds $4 billion in contract value. For Q3 2024, ISG projects revenues between $64-66 million and adjusted EBITDA of $7-8 million. The company continues to focus on its capital allocation strategy, including reinvestment, debt management, and potential strategic acquisitions.

Positive

• Adjusted EBITDA increased by over 60% sequentially from Q1 to Q2 2024
• Utilization improved by more than 800 basis points quarter-over-quarter
• Adjusted EBITDA margin increased by 400 basis points from Q1 to Q2 2024
• ISG Tango platform contract value now exceeds $4 billion
• Generated $2.2 million in cash from operations in Q2 2024
• Debt reduced to $74.2 million from $79.2 million at the end of 2023

Negative

• Q2 2024 revenues decreased by 14% year-over-year to $64.3 million
• Operating income declined to $3.7 million from $4.9 million in Q2 2023
• Net income decreased to $2.0 million from $2.3 million in Q2 2023
• Adjusted EBITDA fell by 30% year-over-year in Q2 2024
• Adjusted EBITDA margin decreased to 11.1% from 13.6% in Q2 2023
• Clients continue to delay the start of new initiatives and extend spending periods

Insights

Financial Analyst

ISG's Q2 2024 results reveal a mixed financial picture. While revenues declined 14% year-over-year to $64.3 million, the company showed sequential improvement from Q1. Notably, adjusted EBITDA increased by over 60% quarter-over-quarter and the adjusted EBITDA margin improved by 400 basis points to 11.1%.

The company's focus on operational efficiency is evident, with utilization up 800 basis points. However, regional performance varied significantly, with the Americas showing resilience (-5%) while Europe (-23%) and Asia Pacific (-31%) experienced steeper declines. The $4 billion contract value on the ISG Tango platform is a positive indicator for future growth.

With Q3 guidance of $64-66 million in revenue and $7-8 million in adjusted EBITDA, ISG appears cautiously optimistic about near-term performance. The maintained dividend and ongoing share repurchases signal confidence in the company's financial stability.

Market Research Analyst

ISG's Q2 results reflect broader market trends in the technology advisory sector. The company's commentary on client behavior – delaying new initiatives and extending spending periods – aligns with the cautious approach many businesses are taking in the current economic climate. However, the strong pipeline and anticipated demand pickup late in the year suggest potential for recovery.

The growth in contract value on the ISG Tango platform is particularly noteworthy. As an AI-powered solution, it demonstrates ISG's adaptation to emerging technologies and could be a key differentiator in a competitive market. The platform's potential to accelerate client value and improve ISG's margins could be a significant driver of future growth.

Investors should monitor macroeconomic factors, especially inflation trends and potential interest rate cuts, as these could significantly impact client spending patterns and ISG's performance in the coming quarters.

Tech Expert

ISG's emphasis on its AI-powered ISG Tango platform is a strategic move in the evolving tech advisory landscape. With contract value exceeding $4 billion, this platform demonstrates ISG's commitment to leveraging AI for operational efficiency and client value. The platform's ability to accelerate 'speed to value' for clients while expanding ISG's margins showcases a win-win technological solution.

The company's focus on innovative platform solutions aligns with the industry trend towards AI-driven advisory services. This could potentially offset the impact of delayed client initiatives by offering more efficient and cost-effective solutions. As AI continues to reshape the advisory sector, ISG's investment in such technologies could be a key differentiator, potentially leading to increased market share and improved financial performance in the long term.

• Reports second-quarter GAAP revenues of $64 million
• Reports second-quarter net income of $2.0 million, GAAP EPS of $0.04 and adjusted EPS of $0.08
• Reports second-quarter adjusted EBITDA of $7 million
• Generates $2.2 million of cash from operations
• Declares third-quarter dividend of $0.045 per share, payable October 4, 2024, to shareholders of record as of September 6, 2024
• Sets third-quarter guidance: revenues between $64 million and $66 million and adjusted EBITDA between $7.0 and $8.0 million

STAMFORD, Conn.--(BUSINESS WIRE)-- Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced its financial results for the second quarter ended June 30, 2024.

“ISG delivered sequentially stronger results in the second quarter,” said Michael P. Connors, chairman and CEO. “Adjusted EBITDA was up more than 60 percent, utilization was up more than 800 basis points, and adjusted EBITDA margin was up 400 basis points, driven by an improved product and services mix, all as our revenue base stabilized versus the first quarter.

“Though clients continue to delay the start of new initiatives and extend their spending over longer periods, our pipeline is strong, and with inflation easing and the prospect of interest rate cuts on the horizon, we anticipate demand picking up again late this year.”

Connors said an increase in contract value flowing through the ISG Tango™ sourcing platform is a sign of accelerating client activity. “Contract value on our AI-powered ISG Tango platform now exceeds $4 billion,” said Connors. “This innovative platform solution accelerates speed to value for our clients and generates expanded margins for ISG.”

Second-Quarter 2024 Results

Reported revenues for the second quarter were $64.3 million, down 14 percent from $74.6 million in the prior year’s second quarter. Reported revenues were $40.0 million in the Americas, down 5 percent; $18.8 million in Europe, down 23 percent; and $5.5 million in Asia Pacific, down 31 percent, all versus the prior year.

ISG reported second-quarter operating income of $3.7 million, compared with operating income of $4.9 million in the prior year. The firm’s reported second-quarter net income was $2.0 million, compared with net income of $2.3 million in the prior year. Income per fully diluted share was $0.04, compared with income per fully diluted share of $0.05 in the prior year.

Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the second quarter was $3.8 million, or $0.08 per share on a fully diluted basis, compared with adjusted net income of $5.3 million, or $0.11 per share on a fully diluted basis, in the prior year’s second quarter.

Second-quarter adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was $7.1 million, down 30 percent from the prior-year second quarter. Adjusted EBITDA margin (a non-GAAP measure calculated by dividing adjusted EBITDA by reported revenues) was 11.1 percent, compared with 13.6 percent in the prior year.

Other Financial and Operating Highlights

ISG generated $2.2 million of cash from operations in the second quarter, compared with generating $2.8 million of cash in the second quarter last year. The firm’s cash balance totaled $11.8 million at June 30, 2024, down from $14.0 million at March 31, 2024.

During the second quarter, ISG repurchased $2.0 million of shares and paid $1.7 million of contingent consideration for prior acquisitions. As of June 30, 2024, ISG had $74.2 million in debt outstanding, down from $79.2 million at the end of last year.

2024 Third-Quarter Revenue and Adjusted EBITDA Guidance

“For the third quarter, ISG is targeting revenues of between $64 million and $66 million and adjusted EBITDA of between $7.0 million and $8.0 million. We will continue to monitor the macroeconomic environment, including the impact of FX, inflation and other factors, and adjust our business plans accordingly,” said Connors.

Quarterly Dividend

The ISG Board of Directors declared a third-quarter dividend of $0.045 per share, payable on October 4, 2024, to shareholders of record as of September 6, 2024.

“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., U.S. Eastern Time, Tuesday, August 6, 2024, to discuss the firm’s second-quarter results. The call can be accessed by dialing +1 (800) 715-9871, or, for international callers, by dialing +1 (646) 307-1963. The access code is 6237254. A recording of the conference call will be accessible on ISG’s investor relations page for approximately four weeks following the call.

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) potential terminations of engagements, delays or reductions 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 U.S. Securities and Exchange Commission. ISG undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Non-GAAP Financial Measures

ISG reports all financial information required in accordance with U.S. generally accepted accounting principles (GAAP). In this release, ISG has presented both GAAP financial results as well as non-GAAP information for the three and six months ended June 30, 2024, and June 30, 2023. ISG believes that evaluating its ongoing operating results will be enhanced if it discloses certain non-GAAP information. These non-GAAP financial measures exclude non-cash and certain other special charges that many investors believe may obscure the user’s overall understanding of ISG’s current financial performance and the Company’s prospects for the future. ISG believes 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.

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 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 comparing 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 Stamford, Conn., ISG employs 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.

Information Services Group, Inc.
Condensed Consolidated Statement of Income and Comprehensive Income
(unaudited)
(in thousands, except per share amounts)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenues		$	64,263			$	74,609			$	128,532			$	153,095
Operating expenses
Direct costs and expenses for advisors			38,908				45,847				79,954				95,016
Selling, general and administrative			20,083				22,330				44,171				43,000
Depreciation and amortization			1,622				1,569				3,127				3,166
Operating (loss) income			3,650				4,863				1,280				11,913
Interest income			222				97				479				181
Interest expense			(1,568	)			(1,407	)			(3,068	)			(3,143	)
Foreign currency transaction loss			13				156				6				(38	)
(Loss) Income before taxes			2,317				3,709				(1,303	)			8,913
Income tax provision			279				1,376				48				3,089
Net (loss) income		$	2,038			$	2,333			$	(1,351	)		$	5,824
Weighted average shares outstanding:
Basic			48,798				48,476				48,645				48,457
Diluted			49,577				50,317				48,645				50,302
(Loss) Earnings per share:
Basic		$	0.04			$	0.05			$	(0.03	)		$	0.12
Diluted		$	0.04			$	0.05			$	(0.03	)		$	0.12

Information Services Group, Inc.
Reconciliation from GAAP to Non-GAAP
(unaudited)
(in thousands, except per share amounts)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Net (loss) income		$	2,038			$	2,333			$	(1,351	)		$	5,824
Plus:
Interest expense (net of interest income)			1,346				1,310				2,589				2,962
Income taxes			279				1,376				48				3,089
Depreciation and amortization			1,622				1,569				3,127				3,166
Interest accretion associated with contingent consideration			31				26				57				51
Acquisition-related cost (1)			-				-				25				-
Severance, integration and other expense			698				1,076				3,677				1,342
Foreign currency transaction loss			(13	)			(156	)			(6	)			38
Non-cash stock compensation			1,112				2,612				3,361				4,654
Adjusted EBITDA		$	7,113			$	10,146			$	11,527			$	21,126
Net (loss) income		$	2,038			$	2,333			$	(1,351	)		$	5,824
Plus:
Non-cash stock compensation			1,112				2,612				3,361				4,654
Intangible amortization			738				789				1,492				1,583
Interest accretion associated with contingent consideration			31				26				57				51
Acquisition-related cost (1)			-				-				25				-
Severance, integration and other expense			698				1,076				3,677				1,342
Write-off of deferred financing costs			-				-				-				379
Foreign currency transaction loss			(13	)			(156	)			(6	)			38
Tax effect (2)			(821	)			(1,391	)			(2,754	)			(2,575	)
Adjusted net income		$	3,783			$	5,289			$	4,501			$	11,296
Weighted average shares outstanding:
Basic			48,798				48,476				48,645				48,457
Diluted			49,577				50,317				48,645				50,302
Adjusted earnings per share:
Basic		$	0.08			$	0.11			$	0.09			$	0.23
Diluted		$	0.08			$	0.11			$	0.09			$	0.22

(1)		Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.
(2)		Marginal tax rate of 32%, reflecting U.S. federal income tax rate of 21% plus 11% attributable to U.S. states and foreign jurisdictions.

Information Services Group, Inc.
Selected Financial Data
Constant Currency Comparison
						Three Months								Three Months
	Three Months		Constant			Ended			Three Months		Constant			Ended
	Ended		currency			June 30, 2024			Ended		currency			June 30, 2023
	June 30, 2024		impact			Adjusted			June 30, 2023		impact			Adjusted
Revenue	$	64,263	$	180		$	64,443		$	74,609	$	(52	)	$	74,557
Operating income	$	3,650	$	(29	)	$	3,621		$	4,863	$	(149	)	$	4,714
Adjusted EBITDA	$	7,113	$	(18	)	$	7,095		$	10,146	$	(138	)	$	10,008
						Six Months								Six Months
	Six Months		Constant			Ended			Six Months		Constant			Ended
	Ended		currency			June 30, 2024			Ended		currency			June 30, 2023
	June 30, 2024		impact			Adjusted			June 30, 2023		impact			Adjusted
Revenue	$	128,532	$	147		$	128,679		$	153,095	$	241		$	153,336
Operating income	$	1,280	$	(138	)	$	1,142		$	11,913	$	(166	)	$	11,747
Adjusted EBITDA	$	11,527	$	(121	)	$	11,406		$	21,126	$	(152	)	$	20,974

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805472543/en/

Press Contact:

Will Thoretz

+1 203 517 3119

will.thoretz@isg-one.com



Investor Contact:

Michael Sherrick

+1 203 517 3104

michael.sherrick@isg-one.com

Source: Information Services Group, Inc.

FAQ

What were ISG's Q2 2024 revenue and EPS figures?

ISG reported Q2 2024 revenues of $64.3 million, GAAP EPS of $0.04, and adjusted EPS of $0.08.

How much did ISG's (III) Q2 2024 revenue decline compared to the previous year?

ISG's Q2 2024 revenue declined by 14% compared to the same quarter in the previous year.

What is ISG's (III) revenue guidance for Q3 2024?

ISG projects revenues between $64 million and $66 million for Q3 2024.

How much is ISG's (III) Q3 2024 dividend?

ISG declared a Q3 2024 dividend of $0.045 per share, payable on October 4, 2024.

What is the contract value on ISG's Tango platform as of Q2 2024?

The contract value on ISG's AI-powered Tango platform now exceeds $4 billion.