Information Services Group(US:III)2022-11-04 19:01Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $69 million, with a constant currency impact of $73 million, affected by a 540 basis points foreign exchange impact [11] - Adjusted EBITDA was nearly $11 million, with an EBITDA margin of 16%, marking the highest in the firm's history [10][11] - Recurring revenues reached $26 million, representing 37% of overall revenue, with year-to-date recurring revenues at $78 million [12] Business Line Data and Key Metrics Changes - The Americas business, excluding automation, grew 14% in Q3, driven by digital services [13] - Europe reported a 13% growth in constant currency, with key verticals showing double-digit growth [25] - Asia Pacific revenues were down 3% in constant currency due to timing issues, but year-to-date revenues were up 20% [28] Market Data and Key Metrics Changes - The Americas delivered $42 million in revenue, down 2% year-over-year, while Europe saw revenues of $19 million, up 13% in constant currency [22][25] - Asia Pacific revenues were $7 million, down 3% in constant currency, but the region is expected to continue its growth [28] Company Strategy and Development Direction - The acquisition of Change 4 Growth aims to enhance capabilities in organizational change management, with expected demand growth of 15% CAGR over the next five years [19][20] - The company is focused on continuous digital transformation and helping clients leverage technology for operational efficiency [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record revenue and profitability for the full year, despite macroeconomic challenges [30][31] - The company anticipates strong demand for services as enterprises continue digital transformations [30] Other Important Information - The company returned nearly $7 million to shareholders in Q3, including share repurchases and dividends [18] - The headcount increased by 56 professionals, reflecting investment in higher growth areas [38] Q&A Session Summary Question: Details on the Change 4 Growth acquisition - The acquisition involved a $3 million payment upon closing, with potential performance-based earnouts for 2024 and 2025 [51][52] Question: Cash levels and shareholder returns - The company is comfortable with its cash levels despite a decrease from previous quarters, attributing it to active shareholder returns and tax payments [53][56] Question: Automation business growth outlook - The automation business remains viable, with competitive pressures noted, but management is optimistic about its future [58][59] Question: In-person events recovery - In-person events are returning, with successful client sourcing events held recently, although not yet at pre-pandemic levels [61][62] Question: Headcount increase and talent availability - The increase in headcount was strategic to capture available talent in the market, with expectations of lower hiring in Q4 due to holiday season [75] Question: Pricing dynamics in the market - Pricing power is strong in digital services and recurring revenue streams, while cost takeout services are more sensitive to pricing [80] Question: Tax rate commentary - The lower tax rate was primarily due to a mix of profitability across jurisdictions, with expectations of a higher rate in Q4 [84] Question: Geographic footprint of Change 4 Growth - Change 4 Growth primarily operates in the U.S. and the U.K., with opportunities for expansion in consumer services and retail [87][90] Question: Asia Pacific market performance - The Asia Pacific market is strong, with a large deal anticipated to contribute to Q4 revenues [111] Question: J-curve impact of new hires - New hires are expected to impact productivity, with a timeline for revenue realization projected into Q4 and Q1 [113]