Information Services Group(III) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q2 2021 were $71 million, up 23% year-over-year, with all regions showing double-digit growth [9][24] - Recurring revenues reached $22 million, an 18% increase from the prior year, representing 31% of total revenues [9] - Adjusted EBITDA was nearly $10 million, reflecting a 32% increase compared to the previous year, with an adjusted EBITDA margin of 14%, up 100 basis points [9][10] - Net income for the quarter was $4.1 million, or $0.08 per diluted share, compared to $0.6 million, or $0.01 per diluted share in the prior year [25] - The company generated $21 million of operating cash in the first half of the year, with a cash balance of $44 million at the end of Q2 [10][27] Business Line Data and Key Metrics Changes - The Americas region generated $40 million in revenue, up 28% year-over-year, with strong growth in consumer services, energy, utilities, health sciences, and media verticals [13] - European revenues were $24 million, a 13% increase, with double-digit growth in consulting, research, and GovernX businesses [15] - Asia-Pacific revenues surged 36% to $6.5 million, driven by growth in public sector, banking, insurance, and energy verticals [17] Market Data and Key Metrics Changes - The company served 583 clients in Q2, a 19% increase year-over-year, with 64 new clients, marking a 31% increase [11] - Revenues from existing clients grew by 15% year-to-date, indicating strong client retention and expansion [11] Company Strategy and Development Direction - The company is focused on digital transformation and cloud adoption, positioning itself to meet the pent-up demand in these areas [12][20] - The ISG NEXT operating model is enhancing agility and account expansion opportunities, contributing to margin expansion [9][10] - The company is actively pursuing acquisitions in digital and recurring revenue streams as part of its "String of pearls strategy" [43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand for services despite potential impacts from the Delta variant and uneven vaccination rates [11][20] - The company anticipates double-digit growth in Q3, targeting revenues between $66 million and $68 million [20] Other Important Information - The board approved a $25 million increase in share repurchase authorization, bringing the total to $28 million [18] - A quarterly cash dividend of $0.03 per share was declared, payable on September 24 [18][19] Q&A Session Summary Question: How should we think about the pacing through the quarter? - Management indicated that the second half looks promising, but Q3 may see slower growth in Europe due to vacation seasonality [34][35] Question: Update on headcount and growth? - Headcount increased to approximately 1,290, reflecting ongoing business growth, with expectations to maintain similar numbers in the second half [37] Question: Thoughts on the benefits of the ISG NEXT model? - The ISG NEXT model has improved operational efficiency and allowed for better resource allocation across global teams [39][40] Question: Update on acquisition pipeline? - The company remains active in pursuing acquisitions focused on digital transformation and recurring revenue streams, but no imminent deals are expected [43] Question: Performance of ISG Automation business? - The ISG Automation business is performing well, contributing to overall digital business growth, which is expected to continue in a double-digit growth scenario [50] Question: Reasons for continued cash buildup? - The cash buildup is a result of strong operational performance and cash generation, providing flexibility for capital allocation [52] Question: Competitors replicating ISG NEXT model? - Management noted that some competitors are taking notice of the ISG NEXT model, indicating its effectiveness and potential industry influence [54] Question: Growth opportunities by region? - The U.S. is seeing strong demand for digital services, while Europe and Asia-Pacific are catching up, particularly in digital transformation [63][64]