Information Services Group(III) - 2024 Q1 - Quarterly Results

Financial & Operational Highlights ISG reported Q1 2024 GAAP revenues of $64 million, a net loss of $3.4 million, and adjusted EBITDA of $4 million, with recurring revenue growth and a Q2 dividend Q1 2024 Key Financial Metrics | Metric | Value (USD) | | :--- | :--- | | GAAP Revenues | $64 million | | Net Loss | $3.4 million | | GAAP Loss Per Share | $0.07 | | Adjusted Net Income Per Share | $0.01 | | Adjusted EBITDA | $4 million | | Cash from Operations | $2.3 million | - Recurring revenues for the trailing 12 months reached $126 million, up 10% from the prior 12-month period, and constituted about half of the first-quarter revenues[5] - The company's new sourcing platform, ISG Tango™, launched in March, already has over $2.6 billion of contract value running on it[5] - A second-quarter dividend of $0.045 per share was declared, payable on July 5, 2024[4][14] CEO Commentary & Market Outlook CEO Michael P. Connors noted Q1 market uncertainty but anticipates future growth from AI implementation and cost transformation - The CEO believes the market is turning and will gain momentum over the year, despite clients slowing their spending pace in Q1 due to economic conditions and uncertainty around AI's impact[3] - Significant future investments are anticipated in AI infrastructure and implementation as the market moves from planning to execution[4] - There is a notable increase in demand for cost and spend transformation services as companies adapt to uncertain macroeconomic conditions[5] - The company is encouraged by the continued growth of its recurring revenue business, particularly in research, governance, and platforms like ISG Tango™[5] First-Quarter 2024 Financial Results Q1 2024 financial performance declined significantly, with revenues down 18% to $64.3 million, a swing to operating and net losses, and a 60% decrease in Adjusted EBITDA Q1 2024 Revenue by Geography (vs. Q1 2023) | Region | Q1 2024 Revenue (USD) | YoY Change | | :--- | :--- | :--- | | Americas | $40.8 million | -16% | | Europe | $17.8 million | -23% | | Asia Pacific | $5.6 million | -20% | | Total | $64.3 million | -18% | Q1 2024 GAAP Financial Performance (vs. Q1 2023) | Metric | Q1 2024 (USD) | Q1 2023 (USD) | | :--- | :--- | :--- | | Operating (Loss) Income | ($2.4 million) | $7.1 million | | Net (Loss) Income | ($3.4 million) | $3.5 million | | Diluted (Loss) EPS | ($0.07) | $0.07 | Q1 2024 Non-GAAP Financial Performance (vs. Q1 2023) | Metric | Q1 2024 (USD) | Q1 2023 (USD) | | :--- | :--- | :--- | | Adjusted Net Income | $0.7 million | $6.0 million | | Adjusted Diluted EPS | $0.01 | $0.12 | | Adjusted EBITDA | $4.4 million | $11.0 million | | Adjusted EBITDA Margin | 6.9% | 14.0% | Cash Flow, Balance Sheet, and Capital Returns ISG generated $2.3 million in Q1 2024 cash from operations, improved from prior year, maintained a $14.0 million cash balance, and reduced debt while returning capital - Generated $2.3 million of cash from operations in Q1 2024, compared to using $3.4 million in Q1 2023[10] - Cash balance was $14.0 million at March 31, 2024, down from $22.6 million at December 31, 2023[10] Q1 2024 Capital Allocation Activities | Activity | Amount (USD) | | :--- | :--- | | Dividends Paid | $2.4 million | | Share Repurchases | $2.5 million | | Debt Paid Down | $5.0 million | - Total debt outstanding was reduced to $74.2 million as of March 31, 2024, from $79.2 million at year-end 2023[11] Business Outlook ISG provided Q2 2024 guidance, targeting revenues of $65-67 million and adjusted EBITDA of $7.0-8.0 million, reaffirming its capital allocation strategy Q2 2024 Guidance Q2 2024 Guidance | Metric | Guidance Range (USD) | | :--- | :--- | | Revenues | $65 million - $67 million | | Adjusted EBITDA | $7.0 million - $8.0 million | - The company will continue to monitor macroeconomic factors like FX impact and inflation and adjust business plans accordingly[13] Capital Allocation & Dividend - The Board of Directors declared a Q2 dividend of $0.045 per share, payable on July 5, 2024, to shareholders of record as of June 14, 2024[14] - ISG's capital allocation strategy focuses on reinvesting in the business, managing debt, returning capital to shareholders (dividends and repurchases), and pursuing strategic acquisitions[14] Financial Statements & Reconciliations This section provides detailed unaudited Q1 2024 financial statements, including condensed income statements, GAAP to Non-GAAP reconciliations, and constant currency comparisons Condensed Statement of Income Condensed Income Statement (in thousands) | Line Item | Q1 2024 (USD) | Q1 2023 (USD) | | :--- | :--- | :--- | | Revenues | $64,269 | $78,486 | | Operating (loss) income | $(2,370) | $7,050 | | (Loss) income before taxes | $(3,620) | $5,204 | | Net (loss) income | $(3,389) | $3,491 | Reconciliation from GAAP to Non-GAAP Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q1 2024 (USD) | Q1 2023 (USD) | | :--- | :--- | :--- | | Net (loss) income | $(3,389) | $3,491 | | Plus: Adjustments | $7,803 | $7,489 | | Adjusted EBITDA | $4,414 | $10,980 | Reconciliation to Adjusted Net Income (in thousands) | Line Item | Q1 2024 (USD) | Q1 2023 (USD) | | :--- | :--- | :--- | | Net (loss) income | $(3,389) | $3,491 | | Plus: Adjustments | $4,108 | $2,516 | | Adjusted Net Income | $719 | $6,007 | Constant Currency Comparison Constant Currency Impact on Q1 2024 Results (in thousands) | Metric | As Reported (USD) | Constant Currency Impact (USD) | Adjusted for Constant Currency (USD) | | :--- | :--- | :--- | :--- | | Revenue | $64,269 | $(34) | $64,235 | | Operating income | $(2,370) | $(110) | $(2,480) | | Adjusted EBITDA | $4,414 | $(103) | $4,311 |