III - Earnings call transcript Q2 2019 | Information Services Group, Inc.

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Operator

Good day, and welcome to the Information Services Group Second Quarter 2019 Results 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 the Communications at Executive ISG. I’m Senior to I’d ISG’s second 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 this morning 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 ending 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

today, include currency earnings on adjusted comparability The improves non-GAAP key selected a measures, for constant evaluate we we call, the provides measures the and financial believes performance. this touch will of net which financial During of ISG results to EBITDA, the financial upon discuss used non-GAAP of periods data will adjusted basis. which Company’s the certain transparency greater and presentation between measures, Company’s

be Non-GAAP in provided and financial substitute a additional with for measures not accordance in results should prepared as or considered isolation GAAP. as information, are

current to measure, X-K, report morning applicable the reconciliation of to the closely filed most this refer presented the please which For was measures our GAAP with on all non-GAAP SEC. Form

the turn over David who Berger. be And will followed call Connors, Michael to now, to I’d by like Mike?

Michael Connors

you, review our Thank as we and progress a Today, in momentum everyone. firm. morning, Barry, growing will good

We to Americas are operational and on more with and reflected than QX in discipline progress That's innovation. a with good clients, business focus the Europe. build sequentially making our up and double continue the in our we EBITDA revenues QX

worth million seeing Australia Together contracts are our multiyear quarter. the in public this which $X begin second we in second half progress should business, added and a We with year. U.S. million record-high of We the quarter, $XX during in more the than this government contract for Europe, the sector signed revenue new see firm.

And success, to Our our should continues ISG top our we driven lowering million In the debt of launching XX%. an offering. delever services, sheet network new of balance four $XX inclining. Go strategy million Solutions, Digital recurring for exciting we in Solutions our while platform now be months by a our with pace Digital continue our $XXX are continues Digital building of our quest Among XX% software rate at into grow solutions business XXXX. to revenues last nearly heading revenues, to our business Automation ISG annual double-digit representing a over run and

to objectives. year confidence the on strong half, track second achieve All in full its at of of business remains a to this, combined ISG with new growing adds pipeline our

EBITDA. doubled its momentum a and adjusted more ISG After its in soft X% built quarter, delivered growth than sequential first QX and

verticals. our sciences exceeded revenues and the Globally, and consumer, life saw Our more we $X EBITDA. than generated healthcare for $XX million we in million quarter of growth energy,

advisory, growth service advisory network lines. management, organizational saw change our also and We in business automation

Americas. the overall and served first the clients we clients, including XXX During clients record in XX brand-new half, XXX a

our AVANT better our networking Now pricing Network we clients, clients by speed the us technology options Select. solution and partnership a accelerated initiatives. service The vendor needs. next new called, to to our with to and offer offering turning allows powered week, ISG Among meet a represents number growth recurring network to of Communications services clients, announced to tested range Last a XG more about generation adopted that have offering networking, have will a transformation. successful crucial is Network but only to XX% digital likely solutions, XX% for by begin ISG revenue are in our great can stream from that a clients it. opportunity new gap ISG SD-WAN software-defined Select broader This fill XXXX. of

recurring their contracts. generate win-win while in allow of is be the to offering consumption a demand this continues Automation see garnering network This monthly high clients our to for clients. services in will and Meanwhile, among over ISG interest We revenues clients' the our from ISG marketplace. of our us life high real

cognitive our this year. popular we sold year. latest of showed automation the from staged are ISG an Automation more York, enterprises excellence have automation of industry experimenting maturity that out has and finding event than extremely established preliminary revealed technology Summit, with the our of Last in At New doubled month, we three number set the center which study, Summit in the last last

X.X surveyed the are stage X.X, intelligence. this opportunity tremendous Bot Bot moving and at advance of artificial to a Only most to are at next across of and or mature cognitive technology about X.X this see the of enterprise help We level call stage companies and We our now about scaling RPA Bot by XX% enterprise clients the to capability. automation half level. we the

business see Indeed, RPA well. think Apparently, a market as our the ISG we judging great is in from opportunity software and undervalued. Automation valuations investors automation of providers phase this advisors,

be into revenues double-digit mentioned run $XX from we million I this move as our the at at As business continues. we growth of as rate nearly should offset, XXXX

interest on of about you lot automation have the on aside, this host, and Network There recently in is topic world. Business As the ISG seen Varney interviewed may by robotics. Stu business an being FOX a of advanced

services world's importance platform, with in our grow In terms a data After repository continues year, our its that service of most of the to GovernX, instant platform leverages ISG on clients. of year IT last the launch other late we've platform InformX intelligence growth initiatives, successful how peers. managed new software-based our against performing ISG validated launched this is services to deliver robust, enterprise an ISG

are revenues the working our more We build ISG to are to September. on additional deliver about out we roll to platform in that Overall, excited have and value services. we clients recurring through will enhancements InformX we opportunities

our second been the and also states sluggish multiyear engagements U.S. Idaho $X seeing including the has now are a cycle. million was recently sector In contracts, pickup of quarterly with Australia new we We of $XX new sector, of $X signed and We ISG. signed and signed government in million election the we in for Louisiana, XXXX record Europe. which following new in the million in contracts a all quarter government public of

sequential revenue our to had revenues versus Europe regions, with of growth flat year. prior Turning the X%

As first a year. anticipated and Germany discussed last the with UK X% quarter. was at very nicely up the tough for versus the last the rebounded strong quarter up revenues XX% with compare QX a call, on

second Fresenius, growth Key Financial, in included; segments, the automation service insurance in industry and technology client In business lines. saw sciences, ITERGO, the our in and advisory Lowell Axa quarter our industries, life in BASF. we good engagements and Europe

this $X of leading In relationship dollar million Germany, healthcare ISG revenues than for client. incremental has adding the more one in multimillion world's expanded companies with its

Also relationship large another in dollar Germany, company, chemical grown major ISG has client. its a multimillion with

more with engagements than new New in client totaled million revenue. this $X

In revenues the Americas, X%. grew sequentially by

hold service and Key The in consumer lines. the Refinitiv, QX financial sector services quarter, industry client see quarter CNA curve newest our held Messer in our Humana growth Fund. QX, we contract verticals HR the saw in good our U.S. we the International included and in banking that the Nutrient, engagements changing back as During Financial, Industries, and to services, in begin business but OCM Monetary and growth in advisory tech and take WestRock, public

Americas target, a strategy. wins, also our multimillion continues which engagement and projecting to utilization revenue The high recent pipeline with as digital sourcing of digital operating multiyear provide model a accelerate. second our a Canadian Among is in energy a ISG strong XX% has and to dollar, reached increases company QX been awarded region half growth

a of large company. with We engagements Mexico-based products a awarded new series also multimillion dollar been bakery have

included of Department the expect growth the Office, in global to continued primarily smallest bounce the Department May representing slowed Affairs have and sector. X% months essentially Banking Australian our Asia-Pacific region due Defence, significant the Rio see basis. with public Services engagements and Westpac The in landed Toll Department of of in recently in Australian about our clients back was and Holdings. in quarter Human a flat Taxation business the the Tinto, on Australian of Finally, sluggishness Key was to ahead. new the a decision-making, we Home This just election federal but sequential

a of EBITDA We government half second to wins demand our digital and dynamics for turning pipeline full targeting base the are a momentum adjusted Now and recent series guidance. our building and commercial services in our strong guidance us, promising revenue our ahead in achieve continued guidance. strong year in to sector. our on of we With markets

keep and course, an of any watch changes on the environment macro eye decision-making. in will, client We for

me let will Berger, the results. David our to call that, with turn So summarize financial over who

David Berger

currency and compared Americas, versus and on prior on year, year. Pacific, basis. in morning, a year. of a sequentially, good in revenues sequentially, the flat $X.X XX% XX% by everyone. million million million currency, essentially and X% million in constant negatively versus second the in up prior a and prior and with up constant $XX.X sequentially currency, the a year million in X% Revenues the Europe, decrease X% prior million Revenues and prior basis. X% in versus reported reported down X% on down reported down Currency year were constant were the basis, Mike, versus X% reported Asia $XX.X impacted for $X.X Thanks, quarter the $XX $XX.X flat

million, second million operating of prior down quarter the second XXXX. up quarter operating quarter, Second $X.X $X.X and was the year. the million, reported income more versus We of million adjusted first $X.X in quarter of XXXX than X down EBITDA times from income $X.X

net net Our the of $X.X income for with the $XXX,XXX income compared was in quarter prior year. million

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

XXX utilization of functions. our Consulting points and quarter the was was year. Quarter year-end last XX%, X,XXX, automated from end down versus the some headcount year basis slightly up we for prior as

strength sheet business our balance have and over continues support to the to Our flexibility long-term. the best

was half $XXX,XXX. first Net the by cash provided operations for

sheet, On ended balance $XX.X paying and outstanding was million total the during our in quarter with million the cash, debt $X.X we $XX first the after million down half.

by reduced over $XX XX% We XX have now last the months. debt or our million

back have $X We million in bought the stock also first for half.

borrowing was quarter million average X.X%, as of for shares had outstanding Our XX. the XX.X rate and July first we

to before concluding share remarks now we will Mike go Q&A.

Michael Connors

Thank momentum you, we we summarize, upper are David. and on building trajectory. business, in our To growth are an

half. should is sales and our growth second strong Our revenue accelerate pipeline in the

are initiatives Our recurring business. overall revenues our multiyear the hold uptick with growth QX boost get later will public taking starting a sector in in and

of growth ISG for the Our to XX% we digital business total revenues expect our double-digit of have Automation and year. revenue, remainder nearly the our in grown

objectives. momentum growing our gives reaching together full year confidence Taken in our us

value steadfast excellence to always, we mission are the are deliver operational to long-term, clients. As shareholder creating our our on and focused in for we

much session morning. questions. for now the And very over to let the turn in operator this for Thanks calling me

Operator

We’ll to go Instructions] Sidoti. first Riddick Marc [Operator with

Marc Riddick

Hey, morning. good

over details go couple of I before questions quick and a to of the wanted second acceleration. just I sort more, the get half of drivers in, So revenue

count going finished of things looking some might – end quarter? the that utilization where should opportunities second you that go quarter, have for employee of One of we’re and the forward? these on And where the where go the with on we at where

Michael Connors

David?

David Berger

Yes.

was be the quarter to I that’s the it’ll we in significant the as consulting quarter. of was quarter, We utilization Utilization year. as mentioned headcount, for think the balance don’t XX%. the – the for ended so X,XXX, headcount the year, So for where

Marc Riddick

a touch public And the of of strength activity. bit the Okay. then can on maybe we sort sector little

you had you when first quarter, of had the also during some You had contracts the – signed quarter a mentioned been mentioned your call. and did couple

like the feel And want of out a public is sense the – get what you Just the the to sector, environment like they what general – are particular? within opportunities maybe in now funding there? for

Michael Connors

Yes. Good question.

up. late market activities I contracts The is the a would based of in on picking election somewhat So and series the we quarter. did cycle say, The that sign had been, dormant significant that up, about up. of and been think the have there decision this that elections all before making, we’ve freed governor talked number now stalled change, was that’s I a were

a So in more robust terms much spending. of wouldn’t lot call much state, the we’re yet, of I it but more seeing in – governments opportunity

So and with we’re quarter, our we past getting shares see during Idaho, things Louisiana. certainly this like it

I at end started state the is think of which Missouri, we’ve the QX. now which late mentioned was of QX,

we’re bit And the so public kind in now of sector. bullish

We also sluggish had for especially government U.S., been had really, Australia, signings the in good down pretty a outside year. which

we up the with defense there APO, opened have and floodgates So so the – but administrative on.

a the a up to see states all to on going this. continue how bit. macro U.S. But moment, react the at keep that’s an eye in has We’ll spending the we’ll So opened on the in environment.

Marc Riddick

then, products could a recurring maybe at? gives certainly And about? how to those I wonder we should monthly, think the works? is come far That sounds pricing about type encouraging. how at services And very forward of that thing new this think so new processed monthly on a and little mentioned for as because been the if you service? as plans what I do renewal to you revenue. ability received visibility how and dynamic as Great. Okay. contracts Or – bit how moving add that touch you going like Or

Michael Connors

referencing. really – let Select, new so Network what me Yes, you’re which on comment on is

So context. let a little me give you

their large are that Verizon, it the see in AT&T, – announced, large just pick after going to essentiality going They British Telekom here. well where as they a we’re refocusing to large accounts, gap for their look or is this Network you think, leading focusing and bit where the Deutsche services. other international is most channels to others. for players so. And telecom Telecom accounts, the client, providers all – XXX a market fill in a Select, a are also and and So it, on of try Out

client to you example explain me give a it. Let

for need go services; to client get their data, done. they of data, transformation bundled they needs need network, a a voice, on to So, software, Network set a software, voice need we they our as they are What work video. they an are providers series need for digital their looking Today, of of offering all that is hardware, opportunity video. need will own they Select hardware, in they

Using of servers, AVANT a our has as partner, who Communications with cetera. relationships et lot providers, software and hardware

a seats. is We’ll and we’ll sign locations. so this may is And network the help customer negotiate XXX,XXX might will select, will recommendations. for them have what contract. we them. that make them take with the requirements, their total once help X,XXX provider What provider the down best have on is client selected, And do we’ll contracts suit them They work the

there’ll this goes recurring a will be out bill’s every the on $XX,XXX XX% that revenue Normally, years. And let’s month. over so and in client-relationship three call these it particular bill stay a contracts approximately $XXX,XXX a a example, assume we the are month, three month, of and as we years, basis, those get will a that

So, this about That's worth it particular is how will client $XXX,XXX. work.

large so to telecom with and to tier the of that larger of take, that in that services moving where some that And today in allowing try But providers network the clients. take do ISG to clients will other continue now we channel. we work our advisory the are channels second and step will do that's

that how will revenue will it client monthly the we consumption recurring of work. revenue term a the over that's the of the will of of contract, the be get services So as flow

Marc Riddick

Okay, on Thank the you that. helpful. for color That’s Yes. very that’s great.

Michael Connors

Mark. Thanks, Yes.

Operator

next Vincent go Barrington Colicchio We'll to Research. with

Vincent Colicchio

product network the landscape there there the On competitors mentioned, you – at of there Are no? what does view a like? competitive just or Mike, number is look

Michael Connors

So good morning, is This – good Vince, question. good new.

of they carriers. in announcements after now from the these reduction So went forced British think Telecom, AT&T, and Verizon, Verizon, all They are clients. about significant AT&T largest refocusing

white this is like state to opportunity, So new a tackle. new ISG folks for

a but there too we to too vacuum. be So to will the of call number to early this But to expect competitors in it's fill try state early call.

that time. So market quarters, know in that I seeing for we're couple of is in and the at new. defer let a But will very what point you it

Vincent Colicchio

then, had And market. the mentioned you U.S. eye there the Okay. Europe. keep on was in that some you'll an macro in And slowing

It’s Are Just the on that the you you in slowing curious, seeing issues can. U.S. your the of what I’d address, macroeconomy you market? are? like thoughts to one if the

Michael Connors

Yes.

tariffs. seeing slowing, the it, So with we a we are not watching especially are

industrial slowed the they yet. not of We are are moving decision-making. the the consumer and But who kind players, watching have down quickly

you some reduce out of So most think moved situation. China slapped tariff about companies at of parts being slapped chemical reduce look this have and They to the part, are if not expense as temporary with the as consumer workforces companies that tariff. they the where try coming they a on, manufacturing have yet,

We it are watch going to carefully.

and for be things time, We longer we’ll decision-making. there want fact, think and some periods that quick. upside watch also this And may for on down and respond react slow of these on Brexit to that goes so that players will like if, of us in may

date. situation we’re much longer are don’t it particular. watch of the carefully going see for to in U.S., watching on So yet. this depending Halloween it’s kind know we Brexit, we I it But lasts. it tariff how a

back XX% We quarter. We it during at growth the had watching nice carefully. a spring are

there’s keep decision. But an if we’ll looks continue we right course, watch et pipeline changes quite We the that. we of to eye it any now, auto with robust. see in slowdown coming But will or watch Germany, on of see a that. pretty good out And robust cetera, but third the to exports quarter, industry, will the

Vincent Colicchio

Mike. you, Thank Okay.

Michael Connors

Thanks Vince.

Operator

go [Operator to Instructions] with Gomes NOBLE We’ll next Capital. Joe

Joe Gomes

morning. Good

Michael Connors

Good morning, Joe.

Joe Gomes

their was why us was the the little – about that valuations if I some just being us give vendors detail some the on color if of give is I think business more more some give talking RPA undervalued. and there, wondering you of RPA, granularity, wondering service you undervalued. you software Mike, were can little it's can providers, you your to a – you more confidence and as

Michael Connors

Yes.

with the with revenue Prism, So look, on million. billion providers seen Blue $XXX we've valuation very think $X valuation themselves, of under UiPath, large I $XXX million software revenue,

here. software the the value. get was going they $X in automation billion So another infusion for to number or had $XXX,XXX last around likely providers, But which is AA, anywhere, billion $X

Thoughtonomy, which there bought Symphony is less Blue revenue There at company Their is revenue. a number one than comp $XX call public were advisors called like thin; of that was million. We've by us, times just million. our brought was at $XXX partners, before the it, of and X.X about indicated that a is Prism. quite traded

believe we run we'll we by million value here, XXXX, itself. enter of we in we're assets' rate standpoint, And that and million $XXX sitting as around $XX and the the be think

look that's in we it at market. how So the

is to at we'll continue pick and we're But how that build follow our up have unleash today. we we the assess going know to we market, we So point. not stock that or can will in our value value assets, some that expect hopefully, what and

Joe Gomes

gap X%, Thanks is growth, we the of growth? didn't Americas sequential can But in on bridge double-digit hit you a the you that. would great. to as why you see just And first the which call, quarter you mentioned saw Okay. that that double-digit thought Great. kind

Michael Connors

we of weren't be we Yes. in may capture did points auto big we not there. our ad to that hoc with The with client that kind able thought an the, QX materialize XXX that project basis able

say XXX Joe. surrounding So other basis on just actually bit, that the about us and would was I points, timing cost

Joe Gomes

event? you mentioned also out from Okay. events in one that the Great. quarter the of And call been that first What of is your had had QX. pushed postponed, status

Michael Connors

now That's scheduled for October.

see should we the quarter. fourth in that So

Joe Gomes

That’s great.

Appreciate much. you thank Okay, it.

Michael Connors

Joe. much, very Thanks

Operator

no remarks. back closing it further to in or queue. questions At any like turn additional this time, I'd to are for management there

Michael Connors

Thank you much. very

clients help with Let and employees me our of that It's firm and our get momentum whole a by people have digital the our of I transform am exciting clients clients enthusiasm and in energized faster travel growth. forward showing for the being I we and of and our close for future to to excellence by them achieve sense around our revolution. help as employees, the real operational meeting our I the part are excitement saying, our

thank all thank of our continued on for Let you around me our a for all your today support in their me ISG. great contributions day. success. confidence of and to the Have call world professionals let the And

Operator

that conclude today's does and conference. for you Ladies We participation. gentlemen, your thank

You may now disconnect.

Information Services (III) 5 Aug 192019 Q2 Earnings call transcript