- 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
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
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