- Reports third-quarter revenues of $61.6 million; adjusted EBITDA of $8.2 million, both exceeding guidance
- Reports net income of $2.1 million, up 19%; GAAP EPS of
$0.0 4, flat; adjusted EPS of$0 .10, up 11% (vs. PY) - Delivers quarterly cash flow from operating activities of $10 million; generates $37 million of cash flow from operating activities over last nine months
- Reports quarter-end cash balance of
$3 8 million, up 2.7x versus prior year - Signs three ISG GovernX® client engagements worth a combined
$6 million - Sets fourth-quarter 2020 guidance: revenues of between
$5 6 million and$5 8 million and adjusted EBITDA of between $7 million and $8 million
“Our momentum continued in the third quarter, as we generated quarter-over-quarter revenue growth despite the challenges of COVID-19,” said
“Thanks to our disciplined operating approach, continued cost containment, and more profitable mix of products and services, adjusted EBITDA was up 11 percent versus Q2. Our capital position continues to grow stronger, as we generated
Connors pointed to the continuing success of the firm’s platform-based ISG GovernX® vendor compliance and risk management services as an example of how the pandemic is driving demand. During the quarter, ISG signed three GovernX engagements, worth a total of
Connors also noted that ISG has fully integrated the operations of Neuralify, a market leader in intelligent automation enablement solutions and services acquired in July, with its ISG Automation business. “We are already seeing the benefit of the combination, with Neuralify’s solutions providing a strong market differentiator for our ISG Automation offerings,” Connors said.
Commenting on market demand, Connors said enterprise clients continue to invest in digital capabilities, particularly cloud services and digital workplace solutions, to enable their work-from-home business models. “We see our clients continuing to invest in cloud-based services and all things digital to meet the new realities of business in the current environment,” said Connors. “Enterprises that continue to build their digital capabilities will recover faster and emerge stronger from this crisis. As we move past the pandemic and the global recession, we see strong growth opportunities for ISG as clients once again accelerate their full-scale digital transformations.”
Third-Quarter 2020 Results
Revenues for the third quarter were
Reported revenues were
ISG reported third-quarter operating income of
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the third quarter was
Third-quarter 2020 adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was
Other Financial and Operating Highlights
ISG’s cash balance totaled
2020 Fourth-Quarter Revenue and Adjusted EBITDA Guidance
“For the fourth quarter, ISG is targeting revenues of between
Conference Call
ISG has scheduled a call for
Forward-Looking Statements
This communication contains “forward-looking statements” which represent the current expectations and beliefs of management of ISG concerning future events and their potential effects. Statements contained herein including words such as “anticipate,” “believe,” “contemplate,” “plan,” “estimate,” “target,” “expect,” “intend,” “will,” “continue,” “should,” “may,” and other similar expressions, are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future results and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Those risks relate to inherent business, economic and competitive uncertainties and contingencies relating to the businesses of ISG and its subsidiaries including without limitation: (1) failure to secure new engagements or loss of important clients; (2) ability to hire and retain enough qualified employees to support operations; (3) ability to maintain or increase billing and utilization rates; (4) management of growth; (5) success of expansion internationally; (6) competition; (7) ability to move the product mix into higher margin businesses; (8) general political and social conditions such as war, political unrest and terrorism; (9) healthcare and benefit cost management; (10) ability to protect ISG and its subsidiaries’ intellectual property or data and the intellectual property or data of others; (11) currency fluctuations and exchange rate adjustments; (12) ability to successfully consummate or integrate strategic acquisitions; (13) outbreaks of diseases, including coronavirus, or similar public health threats or fear of such an event; and (14) engagements may be terminated, delayed or reduced in scope by clients. Certain of these and other applicable risks, cautionary statements and factors that could cause actual results to differ from ISG’s forward-looking statements are included in ISG’s filings with the
Non-GAAP Financial Measures
ISG reports all financial information required in accordance with
ISG provides adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, change in contingent consideration, acquisition-related costs, severance, integration and other expense, tax indemnity receivable and financing-related costs), adjusted net income (defined as net income plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, change in contingent consideration, acquisition-related costs, severance, integration and other expense, financing-related costs, and write-off of deferred financing costs, on a tax-adjusted basis), adjusted net income as earnings per diluted share and selected financial data on a constant currency basis which are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations, which management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by ISG to evaluate the Company’s business strategies and management’s performance.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our current and prior-periods local currency financial results using the same point in time exchange rates and then compare the adjusted current and prior period results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP, nor should such amounts be considered in isolation.
Management believes this information facilitates comparison of underlying results over time. Non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure. Non-GAAP measures are provided as additional information and should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the forward-looking non-GAAP estimates contained herein to the corresponding GAAP measures is not being provided, due to the unreasonable efforts required to prepare it.
About ISG
ISG (
Consolidated Statement of Comprehensive Income | |||||||||||||||||
(unaudited) | |||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Revenues | $ | 61,635 | $ | 68,143 | $ | 182,739 | $ | 200,262 | |||||||||
Operating expenses | |||||||||||||||||
Direct costs and expenses for advisors | 36,762 | 37,725 | 111,539 | 116,636 | |||||||||||||
Selling, general and administrative | 20,318 | 23,092 | 60,792 | 70,327 | |||||||||||||
Depreciation and amortization | 1,581 | 1,672 | 4,641 | 5,031 | |||||||||||||
Operating income | 2,974 | 5,654 | 5,767 | 8,268 | |||||||||||||
Interest income | 61 | 41 | 188 | 133 | |||||||||||||
Interest expense | (687 | ) | (1,598 | ) | (2,890 | ) | (4,763 | ) | |||||||||
Foreign currency transaction (loss) gain | (66 | ) | 7 | 14 | (28 | ) | |||||||||||
Income before taxes | 2,282 | 4,104 | 3,079 | 3,610 | |||||||||||||
Income tax provision | 227 | 2,373 | 1,772 | 2,363 | |||||||||||||
Net income | $ | 2,055 | $ | 1,731 | $ | 1,307 | $ | 1,247 | |||||||||
Weighted average shares outstanding: | |||||||||||||||||
Basic | 47,880 | 47,426 | 47,599 | 46,704 | |||||||||||||
Diluted | 49,908 | 48,404 | 49,546 | 47,204 | |||||||||||||
Earnings per share: | |||||||||||||||||
Basic | $ | 0.04 | $ | 0.04 | $ | 0.03 | $ | 0.03 | |||||||||
Diluted | $ | 0.04 | $ | 0.04 | $ | 0.03 | $ | 0.03 | |||||||||
Reconciliation from GAAP to Non-GAAP | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net income | $ | 2,055 | $ | 1,731 | $ | 1,307 | $ | 1,247 | ||||||||||
Plus: | ||||||||||||||||||
Interest expense (net of interest income) | 626 | 1,557 | 2,702 | 4,630 | ||||||||||||||
Income taxes | 227 | 2,373 | 1,772 | 2,363 | ||||||||||||||
Depreciation and amortization | 1,581 | 1,672 | 4,641 | 5,031 | ||||||||||||||
Change in contingent consideration | 48 | - | 48 | 30 | ||||||||||||||
Acquisition-related costs | 100 | 50 | 350 | 58 | ||||||||||||||
Severance, integration and other expense | 1,362 | 462 | 1,730 | 1,371 | ||||||||||||||
Tax indemnity receivable | - | 31 | - | 31 | ||||||||||||||
Financing-related costs | - | - | 92 | - | ||||||||||||||
Foreign currency transaction loss (gain) | 66 | (7 | ) | (14 | ) | 28 | ||||||||||||
Non-cash stock compensation | 2,159 | 2,456 | 6,544 | 7,150 | ||||||||||||||
Adjusted EBITDA | $ | 8,224 | $ | 10,325 | $ | 19,172 | $ | 21,939 | ||||||||||
Net income | $ | 2,055 | $ | 1,731 | $ | 1,307 | $ | 1,247 | ||||||||||
Plus: | ||||||||||||||||||
Non-cash stock compensation | 2,159 | 2,456 | 6,544 | 7,150 | ||||||||||||||
Intangible amortization | 913 | 1,001 | 2,618 | 3,009 | ||||||||||||||
Change in contingent consideration | 48 | - | 48 | 30 | ||||||||||||||
Acquisition-related costs | 100 | 50 | 350 | 58 | ||||||||||||||
Severance, integration and other expense | 1,362 | 462 | 1,730 | 1,371 | ||||||||||||||
Financing-related costs | - | - | 92 | - | ||||||||||||||
Write-off of deferred financing costs | - | - | 167 | - | ||||||||||||||
Foreign currency transaction loss (gain) | 66 | (7 | ) | (14 | ) | 28 | ||||||||||||
Tax effect (1) | (1,487 | ) | (1,268 | ) | (3,691 | ) | (3,727 | ) | ||||||||||
Adjusted net income | $ | 5,216 | $ | 4,425 | $ | 9,151 | $ | 9,166 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||
Basic | 47,880 | 47,426 | 47,599 | 46,704 | ||||||||||||||
Diluted | 49,908 | 48,404 | 49,546 | 47,204 | ||||||||||||||
Adjusted earnings per share: | ||||||||||||||||||
Basic | $ | 0.11 | $ | 0.09 | $ | 0.19 | $ | 0.20 | ||||||||||
Diluted | $ | 0.10 | $ | 0.09 | $ | 0.18 | $ | 0.19 | ||||||||||
(1) | Marginal tax rate of 32.0% applied. | |||||||||||||||||
Selected Financial Data | |||||||||||||||
Constant Currency Comparison | |||||||||||||||
Three Months | Three Months | ||||||||||||||
Three Months | Constant | Ended | Three Months | Constant | Ended | ||||||||||
Ended | currency | Ended | currency | ||||||||||||
impact | Adjusted | impact | Adjusted | ||||||||||||
Revenue | $ | 61,635 | $ | (1,190 | ) | $ | 60,445 | $ | 68,143 | $ | (82 | ) | $ | 68,061 | |
Operating income | $ | 2,974 | $ | (401 | ) | $ | 2,573 | $ | 5,654 | $ | (52 | ) | $ | 5,602 | |
Adjusted EBITDA | $ | 8,224 | $ | (476 | ) | $ | 7,748 | $ | 10,325 | $ | (48 | ) | $ | 10,277 | |
Nine Months | Nine Months | ||||||||||||||
Nine Months | Constant | Ended | Nine Months | Constant | Ended | ||||||||||
Ended | currency | Ended | currency | ||||||||||||
impact | Adjusted | impact | Adjusted | ||||||||||||
Revenue | $ | 182,739 | $ | (749 | ) | $ | 181,990 | $ | 200,262 | $ | (1,290 | ) | $ | 198,972 | |
Operating income | $ | 5,767 | $ | (358 | ) | $ | 5,409 | $ | 8,268 | $ | (34 | ) | $ | 8,234 | |
Adjusted EBITDA | $ | 19,172 | $ | (433 | ) | $ | 18,739 | $ | 21,939 | $ | (58 | ) | $ | 21,881 | |
Press Contact:Will Thoretz +1 203 517 3119 will.thoretz@isg-one.com Investor Contact:David Berger +1 203 517 3104 david.berger@isg-one.com
Source:
2020 GlobeNewswire, Inc., source