- Reports second-quarter GAAP revenues of $71 million,
reflecting negative FX impact of 500 bps
- Reports net income of $5 million, GAAP EPS of $0.10 and
adjusted EPS of $0.13, all second-quarter records
- Reports record adjusted EBITDA of $11 million
- Returns $9 million to shareholders in the form of share
repurchases and dividends in Q2
- Achieves record first-half results: GAAP revenues of $143
million, up 9% in constant currency; net income of $10 million, up
31%; adjusted EBITDA of $21 million, up 16%; GAAP EPS of $0.19, up
27%; adjusted EPS of $0.26, up 13%
- Declares third-quarter dividend of $0.04 per share, payable
September 19 to record holders as of September 6
- Sets third-quarter 2022 guidance: revenues between $71
million and $73 million and adjusted EBITDA of between $10 million
and $11 million
Information Services Group (ISG) (Nasdaq: III), a leading global
technology research and advisory firm, today announced financial
results, including record profitability, for the second quarter
ended June 30, 2022.
“ISG delivered another quarter of solid operating performance,”
said Michael P. Connors, chairman and CEO. “Our results were driven
by double-digit, constant-currency revenue growth in Europe and
Asia Pacific, and in recurring revenues, which, at $26 million,
represented 37 percent of firm revenues, both all-time records. Our
product mix of digital advisory, research and platform services
drove the expansion of our adjusted EBITDA margins to 15 percent,
our highest quarterly margin ever.
“Our strength and market leadership are reflected in continuing
demand for our data, insights, advice and solutions, even in the
face of strong FX headwinds and inflationary pressures,” said
Connors. “Our enterprise clients continue to invest in cloud and
other IT and business services to drive digital transformation and
customer engagement in a highly competitive global environment.
Even in challenging economic times, clients seek our support to
optimize costs and improve operating efficiency using
technology.”
Second-Quarter 2022 Results
Reported revenues for the second quarter were $70.7 million,
compared with $70.6 million in the prior year, and up 5 percent in
constant currency. Currency translation negatively impacted
reported revenues by $3.5 million versus the prior year. Reported
revenues were $39.4 million in the Americas, down 2 percent versus
the prior year, impacted by the completion of a large Automation
engagement; $23.3 million in Europe, down 2 percent versus the
prior year on a reported basis and up 11 percent in constant
currency, and $8.0 million in Asia Pacific, up 22 percent versus
the prior year on a reported basis and up 28 percent in constant
currency.
ISG reported second-quarter operating income of $7.1 million, up
22 percent from $5.8 million in the second quarter of 2021.
Reported second-quarter net income was a record $5.0 million,
compared with net income of $4.1 million in the prior year. Fully
diluted earnings per share was a second-quarter record of $0.10,
compared with $0.08 per fully diluted share in the prior year. Net
income margin (calculated by dividing net income by reported
revenues) increased to 7.0 percent, from 5.8 percent in the second
quarter of 2021.
Adjusted net income (a non-GAAP measure defined below under
“Non-GAAP Financial Measures”) for the second quarter was $6.8
million, or $0.13 per share on a fully diluted basis, compared with
adjusted net income of $6.3 million, or $0.12 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”) reached a record $10.7
million, up 10 percent from the second quarter last year. Adjusted
EBITDA margin (a non-GAAP measure calculated by dividing adjusted
EBITDA by reported revenues) was 15 percent, up 140 basis points
from the prior year.
First-Half 2022 Results
Reported revenues for the first half were a record $143.3
million, up 4 percent versus the prior-year period, and up 9
percent in constant currency. Currency translation negatively
impacted reported revenues by $5.5 million versus the prior year.
Reported revenues were $80.9 million in the Americas, up 3 percent
versus the prior year; $46.7 million in Europe, up 1 percent versus
the prior year on a reported basis and up 10 percent in constant
currency, and $15.7 million in Asia Pacific, up 28 percent versus
the prior year on a reported basis and up 34 percent in constant
currency.
ISG reported first-half operating income of $14.9 million, up 37
percent from $10.9 million in the first half of 2021. The firm also
reported first-half net income and fully diluted earnings per share
of $9.9 million and $0.19, respectively, versus net income of $7.5
million and earnings per share of $0.15 in the prior year. Net
income margin (calculated by dividing net income by reported
revenues) increased to 6.9 percent, from 5.5 percent in the first
half of 2021.
Adjusted net income (a non-GAAP measure defined below under
“Non-GAAP Financial Measures”) for the first half was $13.2
million, or $0.26 per share on a fully diluted basis, compared with
adjusted net income of $11.8 million, or $0.23 per share on a fully
diluted basis, in the prior year’s first half.
First-half adjusted EBITDA (a non-GAAP measure defined below
under “Non-GAAP Financial Measures”) reached a record $21.4
million, up 16 percent from the first half last year. Adjusted
EBITDA margin (a non-GAAP measure calculated by dividing adjusted
EBITDA by reported revenues) was 15 percent, up more than 150 basis
points from the prior year.
Other Financial and Operating Highlights
ISG generated $0.8 million of cash from operations in the second
quarter, versus $8.9 million in the prior year. The firm’s cash
balance totaled $31.5 million at June 30, 2022, down from $43.7
million at March 31, 2022. During the second quarter, ISG
repurchased $5.5 million of shares, paid dividends of $3.4 million
and paid down $1.1 million of debt. As of June 30, 2022, ISG had
$72.3 million in debt outstanding, compared with $76.6 million at
the end of the second quarter last year. At 1.7 times, the firm’s
gross-debt-to-adjusted-EBITDA ratio (a non-GAAP measure calculated
by dividing outstanding debt by adjusted EBITDA) was at a record
low as of June 30, 2022.
2022 Third-Quarter Revenue and Adjusted EBITDA
Guidance
“For the third quarter, ISG is targeting revenues of between $71
million and $73 million and adjusted EBITDA of between $10 million
and $11 million,” said Connors. "We will continue to monitor the
macroeconomic environment, including the impact of FX, inflation
and other factors, and adjust our business plans accordingly.”
Quarterly Dividend
The ISG Board of Directors declared a third-quarter dividend of
$0.04 per share, payable on September 19, 2022, to shareholders of
record on September 6, 2022.
Conference Call
ISG has scheduled a call for 9 a.m., U.S. Eastern Time, Monday,
August 8, 2022, to discuss the company’s second-quarter results.
The call can be accessed by dialing 1-800-304-0389; or, for
international callers, by dialing +1 313-209-5140. The
access code is 7515883. A recording of the conference call
will be accessible on ISG’s website (www.isg-one.com) 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)
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 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,
2022, and June 30, 2021. 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, 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 800 clients, including 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 Stamford, Conn., ISG
employs more than 1,300 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,
2022
2021
2022
2021
Revenues
$
70,701
$
70,597
$
143,264
$
137,168
Operating expenses Direct costs and expenses for advisors
41,370
43,007
85,325
84,163
Selling, general and administrative
20,885
20,492
40,472
39,532
Depreciation and amortization
1,298
1,255
2,587
2,615
Operating income
7,148
5,843
14,880
10,858
Interest income
44
60
89
131
Interest expense
(610
)
(613
)
(1,173
)
(1,256
)
Foreign currency transaction gain (loss)
94
8
118
(3
)
Income before taxes
6,676
5,298
13,914
9,730
Income tax provision
1,719
1,192
4,027
2,200
Net income
$
4,957
$
4,106
$
9,887
$
7,530
Weighted average shares outstanding: Basic
48,160
48,307
48,343
48,406
Diluted
50,742
51,315
51,034
51,814
Earnings per share: Basic
$
0.10
$
0.08
$
0.20
$
0.16
Diluted
$
0.10
$
0.08
$
0.19
$
0.15
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,
2022
2021
2022
2021
Net income
$
4,957
$
4,106
$
9,887
$
7,530
Plus: Interest expense (net of interest income)
566
553
1,084
1,125
Income taxes
1,719
1,192
4,027
2,200
Depreciation and amortization
1,298
1,255
2,587
2,615
Interest accretion associated with contingent consideration
8
34
8
66
Acquisition-related costs (1)
6
13
16
(32
)
Severance, integration and other expense
340
1,165
450
1,300
Foreign currency transaction (gain) loss
(94
)
(8
)
(118
)
3
Non-cash stock compensation
1,942
1,428
3,445
3,576
Adjusted EBITDA
$
10,742
$
9,738
$
21,386
$
18,383
Net income
$
4,957
$
4,106
$
9,887
$
7,530
Plus: Non-cash stock compensation
1,942
1,428
3,445
3,576
Intangible amortization
527
644
1,055
1,358
Interest accretion associated with contingent consideration
8
34
8
66
Acquisition-related costs (1)
6
13
16
(32
)
Severance, integration and other expense
340
1,165
450
1,300
Foreign currency transaction (gain) loss
(94
)
(8
)
(118
)
3
Tax effect (2)
(873
)
(1,048
)
(1,554
)
(2,007
)
Adjusted net income
$
6,813
$
6,334
$
13,189
$
11,794
Weighted average shares outstanding: Basic
48,160
48,307
48,343
48,406
Diluted
50,742
51,315
51,034
51,814
Adjusted earnings per share: Basic
$
0.14
$
0.13
$
0.27
$
0.24
Diluted
$
0.13
$
0.12
$
0.26
$
0.23
(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 Ended June 30,
2022
Constant currency impact
Three Months Ended June 30, 2022
Adjusted
Three Months Ended June 30,
2021
Constant currency impact
Three Months Ended June 30, 2021
Adjusted
Revenue
$
70,701
$
2,665
$
73,366
$
70,597
$
(828
)
$
69,769
Operating income
$
7,148
$
386
$
7,534
$
5,843
$
(392
)
$
5,451
Adjusted EBITDA
$
10,742
$
437
$
11,179
$
9,738
$
(401
)
$
9,337
Six Months Ended June 30,
2022
Constant currency impact
Six Months Ended June 30, 2022
Adjusted
Six Months Ended June 30,
2021
Constant currency impact
Six Months Ended June 30, 2021
Adjusted
Revenue
$
143,264
$
3,902
$
147,166
$
137,168
$
(1,550
)
$
135,618
Operating income
$
14,880
$
621
$
15,501
$
10,858
$
(664
)
$
10,194
Adjusted EBITDA
$
21,386
$
682
$
22,068
$
18,383
$
(680
)
$
17,703
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220808005035/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
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