Information Services Group(III) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record global revenues of $71 million, up 15% year-over-year, with adjusted EBITDA of $10 million, up 24% [8][24] - The EBITDA margin improved by 100 basis points to 14% [9][30] - Cash from operations exceeded $18 million for the quarter, totaling $46 million over the last 12 months, with a cash balance of nearly $55 million, up 43% [9][27] - The net debt to EBITDA ratio reached a record low of 0.6 times [27][30] Business Line Data and Key Metrics Changes - Recurring revenues increased by 10% year-over-year to $23 million [8] - The Americas generated record revenues of $43 million, up 22% year-over-year, with double-digit growth in consumer services, banking, and media [14][24] - European revenues were $20 million, down 4% year-over-year, while Asia Pacific revenues reached $8.1 million, up 42% [17][19] Market Data and Key Metrics Changes - The Americas showed strong performance, while Europe faced challenges due to uneven vaccination rates and slower cloud adoption [17][22] - Asia Pacific experienced record growth, driven by sectors such as energy, banking, and insurance [19] Company Strategy and Development Direction - The company is focused on digital transformation, emphasizing cloud, cyber, customer experience, technology modernization, and data analytics as key growth areas [41][80] - The ISG NEXT operating model is designed to enhance service delivery and client engagement [12][30] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for digital services, particularly in the U.S. and Asia Pacific, while acknowledging lingering impacts from the pandemic in Europe [22][30] - The company anticipates a structural shift towards more cloud adoption and digital transformation [22] Other Important Information - The company declared a fourth-quarter cash dividend of $0.03 per share, payable on December 17 [21] - The company is actively pursuing M&A opportunities while maintaining a disciplined approach to valuation [56][85] Q&A Session Summary Question: Insights on client hesitance and industry shifts - Management highlighted strong growth in banking and consumer services, while noting slower progress in health sciences and manufacturing due to supply chain issues [38][39] Question: Growth in existing client spending - Existing client revenues grew by 17%, driven by investments in cloud, cyber, customer experience, technology modernization, and data analytics [40][41] Question: Future spending growth areas - Management identified potential growth in network infrastructure and artificial intelligence as emerging areas for client investment [43][44] Question: Confidence in European market recovery - Management expressed optimism for European growth, citing government digital initiatives and expected recovery in various sectors [50][52] Question: Pricing strategy amidst wage inflation - The company is experiencing some pricing movement, particularly with new clients, while maintaining premium pricing for existing clients [53][54] Question: Update on ISG Automation segment - The ISG Automation business is growing at double digits, driven by demand for digital transformation [65][66] Question: SG&A expenses and future outlook - Management indicated that SG&A expenses are well-controlled and expected to remain stable [68] Question: Potential hiccups in 2022 - Management is monitoring the impact of vaccination mandates and legislative changes on client spending [70] Question: Training-as-a-service initiative - The new training-as-a-service model aims to support clients in adapting to remote work and digital training needs [77][78] Question: Top priorities for growth in 2022 - Key priorities include focusing on digital transformation areas such as cloud, cyber, customer experience, technology modernization, and data analytics [80] Question: Competitive landscape and reactions - Management noted that the company's virtual work model provides a competitive advantage over peers with traditional models [82][83] Question: Cash balance and capital deployment - The company maintains a healthy cash balance and is committed to dividends, share buybacks, and disciplined M&A activity [84][85]