Information Services Group Announces Third Quarter 2012 Financial Results

  Information Services Group Announces Third Quarter 2012 Financial Results

Third quarter revenues of $46.5 million, Adjusted EBITDA of $5.3 million and
Diluted Adjusted EPS of $0.05

Recurring revenue streams accelerating; Managed Services signs an additional
$10 million of multiyear contracts in the quarter

Full year guidance of revenues between $187-$192 million and Adjusted EBITDA
between $16-$19 million

PR Newswire

STAMFORD, Conn., Nov. 8, 2012

STAMFORD, Conn., Nov. 8, 2012 /PRNewswire/ -- Information Services Group, Inc.
(ISG) (NASDAQ: III), a leading technology insights, market intelligence and
advisory services company today announced financial results for the third
quarter ended September 30, 2012.

"During the quarter we continued to invest in pursuit of recurring revenue
stream businesses, most notably in Managed Services, where we grew revenues
82% in the quarter and signed $10 million in new multiyear contracts," said
Michael Connors, Chairman and Chief Executive Officer, ISG. "The Americas
continued to grow in double digits for the sixth consecutive quarter offset by
the increasingly challenging macroeconomic environment in Europe. Even though
our full year results will be lowered by Europe, we are positioning the firm
for strength in that region in 2013. We have invested this year in the
pursuit of the UK public sector which, if successful, would have upside for us
next year. We are riding out the European storm and believe our broad
geographic reach and the diversity of our service offerings ensure that our
strategy will continue to be embraced by the marketplace."

Third Quarter 2012 Results

ISG reported third quarter revenues of $46.5 million, down 2% versus the prior
year in constant currency (down 5% on a reported basis). The strengthening
dollar negatively impacted revenue by $1.3 million in the quarter compared to
the prior year. Revenues were $26.8 million up 12% in the Americas, our sixth
straight quarter of double digit growth , offsetting a 15% decline in Europe
to $14.2 million and a 17% decline in Asia Pacific to $5.4 million; growth
rates are in constant currency.

ISG reported operating income of $2.4 million for the third quarter of 2012.
This compares to operating income of $1.8 million in the third quarter of
2011. Reported diluted earnings per share (EPS) was $0.01 per share and
compares to a loss of $0.07 per share in the prior year. Adjusted net income
(a non-GAAP measure defined as net income plus amortization of intangible
assets, non-cash stock compensation and non-cash impairment charges for
goodwill and intangible assets on a tax adjusted basis) was $1.8 million, or
$0.05 per share on a diluted basis, compared with an adjusted net loss of $0.5
million, or a loss of $0.01 in the prior year's third quarter.

Third quarter adjusted EBITDA (a non-GAAP measure defined as earnings before
interest, taxes, depreciation, foreign currency translation gains/losses,
amortization and non-cash stock compensation and impairment charges) of $5.3
million compared with $5.4 million in the third quarter 2011. Currency
negatively affected adjusted EBITDA by $0.1 million versus the prior year.
The third quarter results include the release of a performance based
liability tied to the STA Consulting earn-out that is not projected to
materialize totaling $1.9 million. Adjusted EBITDA for the third quarter of
2011 included $0.6 million in restructuring costs. Headcount increased by 45
in the quarter to 810, as investments in people were made to support projected
growth primarily in Managed Services.

September YTD 2012 Results

ISG reported September YTD 2012 revenues of $143.2 million, an increase of 5%
in constant currency (up 2% on a reported basis) or up $3.4 million from
$139.8 million in September YTD 2011. The strengthening dollar negatively
impacted revenue by $4.1 million in the first nine months compared to the
prior year. Revenues were $77.9 million in the Americas up 18% and $19.3
million in Asia Pacific up 11% offsetting an 11% decline in Europe to $46.0
million; growth rates are in constant currency.

Operating income for September YTD 2012 was $4.9 million, a $5.8 million
increase from September YTD 2011 operating loss of $0.9 million. ISG's
September YTD 2012 adjusted net income totaled $5.2 million an increase of
$3.1 million from September YTD 2011 adjusted net income of $2.1 million.
Reported diluted EPS for September YTD 2012 was $0.01, which was up from the
loss of $0.11 in September YTD 2011. Diluted adjusted EPS for September YTD
2012 was $0.14 compared to $0.06 in September YTD 2011.

Adjusted EBITDA for September YTD 2012 of $13.7 million compares to $10.0
million of adjusted EBITDA for September YTD 2011. Currency negatively
affected adjusted EBITDA by $0.7 million versus the prior year. September YTD
2012 results include the release of a performance based liability tied to the
STA Consulting earn-out that is not projected to materialize totaling $1.9
million. Adjusted EBITDA September YTD 2011 included $3.1 million in
deal-related and restructuring costs.

Full Year Guidance

"In light of the macro environment in Europe, the unexpected loss of revenue
during Hurricane Sandy week in the US and unfavorable currency translation we
are updating our full year guidance for revenuesto $187 - $192 million and
adjusted EBITDA between $16 - $19 million," added Michael Connors. "We are
optimistic about our 2013 prospects given the investments made this year and
our ability to continue to advance our long-term strategy. With the increase
in committed Managed Services multi-year contracts, the growth trajectory in
the Americas and potential expansion into the UK public sector, we will enter
2013 in a strong position. Of course we will continue to monitor the macro
environment and respond quickly to any challenges we encounter."

Other Financial and Operating Highlights

ISG cash and cash equivalents totaled $15.0 million at September 30, 2012, a
net increase of $0.8 million from June 30, 2012. The increase in cash
balances was principally attributable to cash generated from operations
partially offset by the non-operating use of cash, including $1.75 million in
debt repayments and $0.3 million acquisition stock buyback. Total outstanding
debt at September 30, 2012 was $64.8 million compared with $66.6 million at
June 30, 2012.

Conference Call

ISG has scheduled a Third Quarter Results conference call at 9:00 a.m. Eastern
Time, Friday, November 9, 2012, to discuss the Company's financial results.
The call can be accessed by dialing 1-888-556-4997 or for international
callers 001-719-457-2627. The access code is 6419867.

About Information Services Group, Inc.

Information Services Group (ISG) (NASDAQ: III) is a leading technology
insights, market intelligence and advisory services company, serving more than
500 clients around the world to help them achieve operational excellence. ISG
supports private and public sector organizations to transform and optimize
their operational environments through research, benchmarking, consulting and
managed services, with a focus on information technology, business process
transformation, program management services and enterprise resource planning.
Clients look to ISG for unique insights and innovative solutions for
leveraging technology, the deepest data source in the industry, and more than
five decades of experience of global leadership in information and advisory
services. Based in Stamford, Conn., the company has more than 800 employees
and operates in 21 countries. For additional information, visit
www.isg-one.com.

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," "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 and the
intellectual property of others; (11) currency fluctuations and exchange rate
adjustments; (12) ability to successfully consummate or integrate strategic
acquisitions; (13) financial condition of various clients in the financial,
automotive and transportation sectors which account for significant portions
of ISG's revenues and may maintain sizable accounts receivables with ISG; and
(14) ability to achieve cost reductions and productivity improvements in any
future value creation plans. 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
U.S. Securities and Exchange Commission. ISG undertakes no obligation to
update or revise any forward-looking statements to reflect subsequent events
or circumstances.

Non-GAAP Financial Measures

ISG reports all financial information required in accordance with U.S.
generally accepted accounting principles (GAAP). In this release, ISG has
presented both GAAP financial results as well as non-GAAP information for the
three and nine months ended September 30, 2012 and September 30, 2011. ISG
believes that evaluating its ongoing operating results will be enhanced if it
discloses certain non-GAAP information. These non-GAAP financial measures
exclude non-cash and certain other special charges that many investors believe
may obscure the user's overall understanding of ISG's current financial
performance and the Company's prospects for the future. ISG believes that
these non-GAAP measures provide useful information to investors because they
improve the comparability of the financial results between periods and provide
for greater transparency of key measures used to evaluate the Company's
performance.

ISG provides adjusted EBITDA (defined as net income plus income taxes, net
interest income/(expense), depreciation, foreign currency transaction
gains/losses, amortization of intangible assets resulting from acquisitions
and non-cash stock compensation and impairment charges for goodwill and
intangible assets) and adjusted net income (defined as net income plus
amortization of intangible assets, non-cash stock compensation and non-cash
impairment charges for goodwill and intangible assets on a tax adjusted basis)
and selected financial data on a constant currency basis (using foreign
currency exchange rates as of July 31, 2011, 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.

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.

Information Services Group, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share amounts)
                               Three Months Ended     Nine Months Ended
                               September 30,         September 30,
                               2012       2011        2012         2011
                               $      $       $       $     
Revenues                                  48,901  143,225     139,812
                               46,469
Operating expenses
Direct costs and expenses for  27,876     28,005      84,672       79,953
advisors
Selling, general and           13,957     16,237      47,052       52,304
administrative
Depreciation and amortization  2,224      2,882       6,637        8,452
  Operating income (loss)      2,412      1,777       4,864        (897)
Interest income                11         23          37           58
Interest expense               (790)      (812)       (2,501)      (2,487)
Foreign currency transaction   (76)       (191)       (69)         9
(loss) gain
  Income (loss) before taxes   1,557      797         2,331        (3,317)
Income tax provision          1,347      3,390       1,877        634
                               $      $       $       $     
  Net income (loss)                               454     (3,951)
                               210        (2,593)
Weighted average shares
outstanding:
  Basic                        36,159     36,337      36,210       36,272
  Diluted                      38,082     36,337      37,464       36,272
Earnings (loss) per share:
                               $      $       $       $     
  Basic                                           0.01      (0.11)
                               0.01      (0.07)
                               $      $       $       $     
  Diluted                                         0.01      (0.11)
                               0.01      (0.07)



Information Services Group, Inc.
Reconciliation from GAAP to Non-GAAP
(unaudited)
(in thousands, except per share amounts)
                                  Three Months Ended      Nine Months Ended
                                  September 30,          September 30,
                                  2012       2011         2012       2011
                                  $      $       $      $    
Net income (loss)                         (2,593)           
                                  210                    454       (3,951)
Plus:
   Interest expense (net of       779        789          2,464      2,429
   interest income)
   Income taxes                   1,347      3,390        1,877      634
   Depreciation and amortization  2,224      2,882        6,637      8,452
   Foreign currency transaction  76         191          69         (9)
   Non-cash stock compensation    667        769          2,191      2,396
                                  $      $       $      $    
Adjusted EBITDA ^(1) (2)                    5,428               
                                  5,303                   13,692     9,951
                                  $      $       $      $    
Net income (loss)                         (2,593)           
                                  210                    454       (3,951)
Plus:
   Non-cash stock compensation    667        769          2,191      2,396
   Intangible amortization        1,788      2,497        5,363      7,338
   Foreign currency transaction  76         191          69         (9)
   Tax effect ^(3)                (962)      (1,314)      (2,897)    (3,696)
                                  $      $       $      $    
Adjusted net income (loss)                   (450)            
                                  1,779                   5,180      2,079
Weighted average shares
outstanding:
   Basic                          36,159     36,337       36,210     36,272
   Diluted                        38,082     36,337       37,464     36,272
Adjusted earnings (loss) per
share:
                                  $      $       $      $    
   Basic                                   (0.01)            
                                  0.05                    0.14       0.06
                                  $      $       $      $    
   Diluted ^(4) (5)                        (0.01)            
                                  0.05                    0.14       0.06
^(1)      Adjusted EBITDA excluding $0.6 million of restructuring for the
          third quarter of 2011 totaled $6.1 million.
          Adjusted EBITDA excluding $1.0 million of deal costs and $2.1
^(2)      million of restructuring for the first nine months of 2011 totaled
          $13.1 million.
^(3)      Marginal tax rate of 38.0% applied.
^(4)      Adjusted earnings per share excluding $0.6 million of restructuring
          for the third quarter of 2011 totaled $(0.00).
          Adjusted earnings per share excluding $1.0 million of deal costs and
^(5)      $2.1 million of restructuringfor the first nine months of 2011
          totaled $0.11.



Information Services Group, Inc.
Selected Financial Data
Constant Currency Comparison
                                 Three                             Three
                                 Months                             Months
                                 Ended                             Ended
           Three      Constant  September   Three      Constant  September
           Months      currency  30, 2012    Months      currency  30, 2011
           Ended                             Ended
           September  impact    Adjusted   September  impact    Adjusted
           30, 2012   ^(1)                   30, 2011   ^(1)
           $      $     $       $      $     $    
Revenue                                               
           46,469      2,026     48,495       48,901     700      49,601
Operating  $      $     $       $      $     $    
income                                            
           2,412       (173)     2,239        1,777      (259)      1,518
Adjusted   $      $     $       $      $     $    
EBITDA                                            
           5,303       (167)     5,136        5,428      (256)      5,172
Adjusted   $      $     $       $      $     $    
EBITDA                                            
^(2)       5,303       (167)     5,136        6,058      (256)      5,802
                                 Nine                              Nine
                                 Months                             Months
                                 Ended                             Ended
           Nine       Constant  September   Nine       Constant  September
           Months      currency  30, 2012    Months      currency  30, 2011
           Ended                             Ended
           September  impact    Adjusted   September  impact    Adjusted
           30, 2012   ^(1)                   30, 2011   ^(1)
           $      $     $       $      $     $    
Revenue                                                  
           143,225     6,014     149,239      139,812    1,948     141,760
Operating  $      $     $       $      $     $    
(loss)                                          
income     4,864       672      5,536        (897)        4         (893)
Adjusted   $      $     $       $      $     $    
EBITDA                                             
           13,692      689      14,381       9,951      10        9,961
Adjusted   $      $     $       $      $     $    
EBITDA                                              
^(3)       13,692      689      14,381       13,068     10       13,078
^(1) Foreign currency rates as of July 31, 2011 used for constant currency
translation.
^(2) Excluding $0.6 million of restructuring
for the third quarter of 2011.
^(3) Excluding $1.0 million of deal costs and $2.1
million of restructuring for the first nine months of
2011.



SOURCE Information Services Group, Inc.

Website: http://www.isg-one.com
Contact: Press, Barry Holt, +1-203-517-3110, Barry.Holt@isg-one.com; or
Investors, David Berger, +1-203-517-3104, David.Berger@isg-one.com
 
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