III - Earnings call transcript Q1 2018 | Information Services Group, Inc.

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Operator

Good day, and welcome to the Information Services Group 2018 First Quarter Investor Conference Call. Today's conference is being recorded, and a replay will be available on ISG's website within 24 hours. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Barry Holt. Please go ahead, sir.

Barry Holt

operator. you, Thank morning. good Hello, and My name Barry Holt. is a Communications at Executive ISG. I'm Senior to I'd ISG's First everyone Quarter to like welcome Conference Call. I'm Executive Chief Connors, and joined Chairman and Chief Michael today Executive David Vice Officer. Financial Berger, and President by Officer;

Before subject and statement. is future we management to beliefs communication contain effects. potential of risks These important are forward-looking represent which ISG results this It forward-looking their that the and begin, statements, could to and note of are those the anticipated. that a like may to I'd read events to current of future uncertainties concerning results differ certain from not and statements actual guarantees cause materially expectations

refer the and SEC, contained listing a statement in that which to in full detailed our For XX-K Form please Risk results. furnished the other ISG's the the risks to more Form last evening covering X-K, forward-looking could of section factors Factors was and results, affect future year

read supplements on and any also annual with XXXX, documents, any including should report relevant these XX, for or documents amendments Form the year the filed December other ISG's You to fiscal ended SEC. XX-K

obtain be ISG's filings www.isg-one.com any or revise or either to subsequent of You able statement reflect SEC ISG at website free events or circumstances. obligation ISG's of website at SEC's update to will on the www.sec.gov. to no copies undertakes any forward-looking

as as comparability of improves measures key are touch substitute net the data for we evaluate call, the provides for results GAAP. we earnings include currency measures a The in information, the be believes isolation this should will financial prepared financial today financial During selected not provided and basis. or of with performance. in on non-GAAP to ISG Non-GAAP considered EBITDA, and accordance results financial the a constant adjusted presentation measures additional adjusted discuss company's used non-GAAP of on periods will which company's certain transparency greater and which between measures,

on reconciliation be presented measure, the to the over will Berger. turn Connors, closely by most the filed Form applicable which followed refer I'd And SEC. all last Mike? to with For like of was non-GAAP report Michael measures to X-K, please call the who David GAAP current now our to evening

Michael Connors

Thank EBITDA. morning, will revenues client revenues and and first We'll ever with and everyone. you, our good for operating Barry, our key We brief reaffirm and largest-revenue our record we cash on million. review guidance quarter reported Today, and full strong adjusted our $XX quarter revenue year you generation. of highlights

Digital revenue continues building be focus and recurring strategic on streams. to our Things All Our

sector our Our than ISG year. or in services, insurance, prior Robotic technology of This the from quarter. quarter and generated for public revenues first the progress automation multiyear drive the reached Automation, more the Digital and verticals, clearly, market. XX% despite manufacturing Services, quarter XX% results and Globally US up strong contract our for ISG, services, softness for research in managed growth helped reflect our and in demand the RPA, quarter. strategy. ever, Recurring revenue with $XX million, our Process best this and

new With multiyear within our is engagements leading working, financial firm. the ability year managed recurring months. a fast food new a company, XXX last for Note served revenues, with strategic ISG. combined multiyear York-based that deals days: Overall, and services that our New the During to revenues with XX Work our three global quarter, XX value we significant contract bullish $XX.X next the contract company uneven, growth more on will new recurring our recurring services with multiyear drive a of begin won than contract and ISG with of clients were including should subscriptions leading over the these contract we on license is The new primarily new a little timing international strategy hospitality a A a services software our a in due to clients, revenue be three renewals. continued on recurring million. focus renewal remain services. managed the and few to

next and engagements tempered somewhat our by and impacted network during growth a of and the completing year. to difficult revenues We returning guidance of service the first $X our the expect And to reported adjusted moved ago. for the we we normalized into this quarter, to was be our area million delayed due in States. million growth This in million. comp Despite drive generate $X.X growth few from with Germany's achieving strategies, of these recurring our engagements revenues in recurring in momentum network the of in double-digit anticipation over few than our earnings clear $XXX in year decline anticipated timing as more three the years. our a the a and continue as XXXX of the had full revenues Those the revenues quarter, reminder, Germany two EBITDA. United year confident record With also will digital service revenue for we EBITDA recovered by to quarters remain

and on demand infrastructure the operations strategic not cannibalizing banks, for transform renewed buyers their renewal the trend at and not over This cars, move supporting outsourcing market client sourcing for demand Approximately and companies spending. a of Automation, risk and I their in provider. run around is or resulting force digital our rate of business digitally as Enterprises means next digital-friendly elevators, market increased strategy. A driving than more for reasons their the high services, our digital demand and limited-scope and is Digital technology to maintain spurring and increase objectives. Digital advice, automation of outsourced expanding digital technologies Things The in report Case five remain to incumbent innovation rate research a is and services of recent services, Such from XX% on One. drives key And the service among have current ISG autonomous a enterprise is overall urgency to is of to contract over five. why are traditional Four. clients. of run increasingly smart the to new buyers for leverage unlocking From need shorter, few business ISG customer from a in next a flexible, them service strong point, regions, enterprises the initiatives. X for Before remains a with $XX up $XX Two. such transformation and IT outsourcing enhance value being Robotic enterprise providers. why of pace revenues new RPA, one or innovation the are points volatility the their digital All coming it. flexibility bullish client research technology to experience our to months services. cloud, Three. XX seek more our Digital enterprise for maintain so digital contracts outsourcing of outsourcing help offerings, awards that transformation last is support technology soaring. as seek behind to underscored other million. to driving our service in achieve in million year Process increasing providers demand have and see years

platforms digital also creating for for continued immediate strong we demand Beyond are growth. services, new our the

strategic the with RPA RPI Thornton, During a Valley-based announced Play, accelerator Plug the - we quarter, partnership alliance strategic and technology largest formed with a innovation Grant Silicon we and world's platform.

and continued X%, to Americas, as were services, included with regions. strong demand Key up research. in $XX million, CNO revenues In managed engagements and Now services, Xylem. services including the Change RPA, as Healthcare client the our for digital turning quarter well

growth. sector suite for the first summit, accelerate the innovations sell our down public network ISG digital side; that the We contract was expose in services and tour them executive multiyear market. buy-side mentioned C the overall to clients and growth held previously digital also events, held softness can by The of new the in successful few Americas help two a innovation delay the to for engagements them provider held our

sluggish engagements be level two delayed U.S. The the is network slower completed the the expect local be at spending over services in state the as sector public multiyear to for the We quarters. is and expected to next year

entertainment enterprise. enterprise The field evolving help global hospitality US-based IT Turning agility of our services also global IT company. client by Latin nearly $X in processes million services and This Americas. service and training million-plus speed initiative and major engagement new delivering automate wins products A services. flexibility. selected digitally ISG the technology automation and delivery $X we network end-user improving accounting engagement for major large dollar in supplier run XXXX. company-wide notable the been for has hospitality of a client selected has back-office ISG food increasing for a technology to costs, system developing to managed company our implementation robotics. a reducing of multimillion been contract will has global and few the in will support management also their them and includes finance using sourcing change ISG a awarded a American-based And a client's through organizational

Europe. digital quarter, the in X% driven in led more UK, up than Reported the our were to growth a revenues XX% Turning services. by by

Defense, second Europe to X-year the the to public quarter As to cost Key European a back have return the strong is normalized transformation. auto during we benchmarking digital growth difficult engagements Germany technology of European comparison in Volkswagen, and during Commerzbank, million TSYS sector during quarter including large verticals. insurance, services. somewhat our with we contract first were included And our client U.K. quarter last large been digital industry good by the the with held in by Europe, bank in a quarter. a awarded in transformation and Among In previously technology the wins segments we engaged our support first Ministry engineering, growth quarter, Europe was projected its Germany's support manufacturer growth to discussed, in year. Olympus. our saw $X using and significant

operating contract the digital automated and new a customer and million, fully for $X is experience involving including function. Our the and of design back-office customer a initial implementation digital service model,

working We the that industry European digital to artificial the and and of solutions. sourcing cognitive solutions selection will Fintech orchestrating be closely the create will bank, with technology intelligence banking pioneer this

that adviser $X.X number Ministry ISG been a to Italian have end awarded be of their has engagement Asia by the Interior the a Pacific. also million areas. We Italy to of of Shifting XXXX through been in the informed IT

included were in Toll several anticipate public the this Holdings, region from in and in federal segment revenues softness public remained growth sector clients quarter X%. the good in offsetting Rio soft Key first due and year. to We Australia. to manufacturing we through the Tinto. Our Qantas changes pick but sector verticals saw up banking, Australian government, The insurance up the

So let year be revenue track ISG. digital to progress services and believe our in continuing given who our another and our for for me results. remain Berger, With what record that, in on growth summarize financial we will recurring the David will turn call over businesses, we

David Berger

Mike, good everyone. and Thanks, morning,

was or million million in was up in with $XX.X Europe, and the were on XXXX; Americas, compared a basis million positively $XX.X of year. from increase X% First $XX.X X% constant $X.X from which X% in Pacific, period Asia revenues in $XX.X $X revenues up a impacted million. million by X% Reported of year, million the an X% were up in prior the prior decline Currency same quarter X%; reported and revenues which the in currency. reported

As Mike year. million the of up prior mentioned, were versus revenues XX% recurring $XX

quarters. we EBITDA First $X.X year, XXXX, advisory over compared reported operating two to million and delay $X a quarter the income XX%. was We million first income in prior first the $X.X service operating by up few $X.X quarter complete million expect notably, of in of in the was next million network quarter the adjusted that with of versus most impacted, engagements XXXX

Our in of net a was quarter income loss the which for the net compared with prior $XXX,XXX $XXX,XXX, year.

year's $X.XX a the $X.X fully with of an per Adjusted prior Our first the $X.XX compared loss income net adjusted quarter for per net of reported with same or share per per million fully first basis million period share earnings of for earnings on the $X.X share XXXX. was was quarter. diluted share a a diluted or $X.XX basis in diluted compared $X.XX on diluted income in

as we adopted As a topic basis, the revenue X, that to XXXX. ASC on XXX, previously, transactions was retrospective new such modified new standard, the ISG standard January discussed applied of

You XX-Q will today. a will results find filed later standard be effect will the the on further year. that Adopting details in for not new our our financial material have

adjustment, cumulative the earnings X,XXX the was at more effect reduction This $X.X X, of means catch-up as services earnings for net than approximately quarter that as P&L. hole, the last a of of recorded resulted you continued taxes, will the India adopting with $X reflected the the deferred a managed hired standard of quarter Utilization retained million. of so-called in the cumulative headcount Quarter-end January discussed XXXX. This which also million We approximately net donut in to X,XXX adjustment revenues revenue growth versus was RPA be XX%. and and year support of not XX% business. our was to with additions end, of to new in

move was have by to strength the our We initiatives headquarters Stamford, operations record the Connecticut. $XXX,XXX million for our support to related year. new the long invested $X.X And capital quarter, million, partially to was flexibility we continues in cash first shares. sheet prior a the versus expenditures, provided businesses our and $X a balance automation Net over in for in $X.X and million quarter repurchased which Our in term.

down On million year end. the outstanding after $XX.X $XXX.X Total we in debt million at paying during million $X.X was sheet, million up quarter. from the the balance year $XX.X with ended X% cash,

we rate quarter borrowing was share Mike average go about as Q&A. outstanding of had XX. the remarks XX.X million shares we X%, April to and concluding Our will before for now

Michael Connors

with engine, revenue. XX% ever $XX Overall, $XX the up of had representing we than XX% over revenue David. we quarter. growth the We largest are million, we summarize, year. Digital recurring of our revenue for million. pleased the strong move full To remain optimistic momentum a ever as representing and you, reported we total our quarter be revenues first the to continues Thank for and revenues, quarter half, services our with largest of with operating through more our XX%, on

have operations, million, $XX and guidance our best revenues in from balance Our generated EBITDA. adjusted first at inflow $X.X ever. we for reaffirmed was strong we cash full cash quarter year million our cash and flow a And for

we of term deliver on Who mission our revenues, always, our Overall, steadfast for long operational automation our focused Who's are is solid, in list As a digital, shareholder foundation services, recurring creating the including value are and excellence to clients. professionals the questions. for and now the much on clients in Thanks blue-chip talented global over a revolution. calling morning. to middle And X,XXX let ground team me very this the digital the for of turn session of the operator in to

Operator

our take Sarkis Sherbetchyan FBR. We'll Instructions] Riley question [Operator with from first B.

Sarkis Sherbetchyan

is that And business? about what the the timing next, the spoke you compared into would two margin advisory remind quarter? slice we it, quarters of network over maybe moving engagements that us higher be the materially or profile of what next delay So that the two to profile quarters here. so, this call would margin Can you of mean the gross saw the

David Berger

that network Yes, than The a has margin is case. the higher average. services our

part of very And so business. it's profitable profitable - our a

Sarkis Sherbetchyan

you as the the cause of growth initiatives? take to give range quarter's That's the on reasoning here. as And to What last in you're midpoint guidance did up, you'd behind seeing the helpful. you current that. you given in would think adjusted both recurring that the the maybe digital of year. other the that engagements guidance and as the call, revisit some reaffirming us the some well in like guidance And EBITDA I you're And it conference revenue mentioned seem color environment

Michael Connors

timing is as great see. uneven of is Look, see be we and revenue. would Digital And the because said quarter. revenues, which as them, you the will. it'll if by little mentioned, of the quarter you pace, is because and I a the in way, XX% going. We'll have at and this at I how part mark. it, The just midyear subscriptions had we the the in a year sell during of high, can look over new Recurring course simply is we them why of think the of you work the you Sarkis, the pace demand on that's to take

be the our as on the stated, go just that as watch level expect - we to But have way we stated through there. as So double-digit that year. million we $XXX growth, to

why we'll a once not. is what take midyear. at are, are work middle where and completed, That's of would we'll So the or do is be whether it our where estimate a look as the be only in we we in see at which the year. it XXXX year, we pace to that when And would done all

Sarkis Sherbetchyan

back if can thanks when No, just for circle you Alsbridge. And acquired I update. that to

I think help of process what Can business? regards create materialize you've acquisition. some working post-integration if on given understand that synergies with that of to revenue maybe you're there were opportunities potential here, seen that to you from plenty us some thought cross-selling of

Michael Connors

The good working Yes. No, well. look, cross-selling question. is extremely

some fast it. think taking price few work outsourcing, we're of services US have million gave We're network, where $X our taken our business, that large managed to all multiple food change our the in our examples I a services, I on very we've a client management. tag selling

trained So our teams we now have up.

a We have we now. our very we're world. is RPA with pleased to level of And around over of We're people of multiple digital course, installed sell clients to in. the of to able And XXX advanced lot people. interest the our training are services

our big "additional has as also add-on service" some as benefit that been client well. a of So a base to

into So base. of we client kind selling quite our with are on multiple pleased the services progress

Operator

take Capital Markets. And from Marco question our Stonegate with we'll next Rodriguez

Marco Rodriguez

network be quantify the way EBITDA if, the services to contracts, to side I and is might to on that was revenue the side. impact the there maybe wondering able a circling back you

Michael Connors

on million earnings $X that we the think I Well, about we that said think estimated side.

will up during year. the more on side. it's revenue And But all a picked that the so be bit

Marco Rodriguez

having you can of delays Or to as about little the was were? the sign person contract? timing Got a just a kind as bit this you. a right And of talk not what far function

Michael Connors

the It was - slowdown. clients, the pace of the

different have to you we And than it you next slower step. have achieve go certain as milestones, things was You milestones. And would pace do these client to of the the we in But it's just, anticipated. move by the pace.

Marco Rodriguez

Understood.

if of And might in you've then the about what in a additional investments you and expecting last the maybe that of 'XX months. anticipating. growth made to XX fiscal bit the kind could Okay. also terms you talk be here maybe And support investments little 'XX fiscal then you're

Michael Connors

could stated We've for call get our level, the to this the things we get EBITDA then recurring, digital next on two a normalized is what areas. We will. will a out primarily the the out that of we of you it all a be year if line, of top investments revenue try revenue, and an investment we try us, our revenue. little we and we're before of second of year has year in more also subjective impact to in try and And try this balance as focused those center the the full One forward we of of ahead. out is It's but stay do investments ahead that. and So is for are And and kind concentrated get fairway kind both a you bit, not drive ahead align could to do bit to areas. prepared but to with go not not levels.

though we try around we Digital. to judgments best the recurring revenues investments, around pace that will to it, And the and All try Marco, Things remain we make So can.

Marco Rodriguez

to that services, high last a talk talked other industry the I demand Got for in retail you there? sort talk bit of as as of RPA believe maybe use. any What are insurance. digital the can could business seeing if being you types about demand, of can talk that little especially the of might about quarter, little certain about you the industries you've you. more at be Maybe fairly outside you in concerned. are financial far business applications of the I looking the out past, know lot And called looking kind maybe And you if solutions kind of in a as And you guys. bit that automation, that. if a they were about

Michael Connors

So industry we're seeing this now segments. in multiple

selection, car things, technology inside in car, the very heavily the of the that, involved selection on all of multitude So automakers. providers connected technology of the around the and that identification, for go we're the a

Very, think and and Plug more are company. that very large They you understand digitize can't We're where Play concepts. the technologies, companies example into them partnership some emerging have into business. come elevator this was very gave I looking a go lot of a I an We detail. elevator has helping our play. interesting to of

to that us also these working And area. Looking from a the of kind excited Marco, We're with the in of we're segment, want with technologies processing then at some is digitization them is of another areas. fully also elevator on putting this their together working with helps company. the fit-for-future We're digital going the of do us care we some very health as working, future. workplace startups the digital new called them helping which are the strategy, medical emerging industry what about in is to help They Europe. care bank

using using very to areas digital around industry look very, when are a look connected So hot. or elevator an at as of that, IoT or the transformation like sensors those cloud cars, agile and moving enterprise, strategy elevators company and such smart manufacturing, Things or around at around an Internet all when getting you migration, I auto things

them. much And rapid becoming services, automotive; financial enhanced and we're examples I and speed participating it's of are different would in health industry there. all segments, those doing some a care; at but with manufacturing; of So are broader the say work certainly, more

Operator

at turn no I'd are like for to Mr. time. Holt, the appears or closing to you back conference It additional remarks. further this there questions any

Michael Connors

Okay.

Mike. is this So

close professionals the Let X,XXX all you world. of saying by to our me just thank around

your especially to of have perform are. to through we you reason able faster great ability today I on digital all at for your achieve to the why be it's firm, to levels the and the transformation, a Thanks and continues think our call in growth, we're help our confidence and continued clients support excellence that operational day.

Operator

call. today's your Thank you concludes This participation. for

disconnect. now may You

Information Services (III) 13 May 182018 Q1 Earnings call transcript