Information Services Group Announces Third Quarter 2013 Financial Results

  Information Services Group Announces Third Quarter 2013 Financial Results

Record third quarter Revenues of $51.4 million, up 11% fueled by double-digit
growth in Europe

Third quarter Adjusted EBITDA of $5.8 million, up 9%; Adjusted EPS of $0.07,
up 46%

Cash increased $4.6 million, up 24% to $23.6 million from June 2013 after $2.5
million in debt repayment and share repurchases

Company reaffirms previously raised full year Revenue and Adjusted EBITDA
guidance

PR Newswire

STAMFORD, Conn., Nov. 7, 2013

STAMFORD, Conn., Nov. 7, 2013 /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, 2013.

"ISG achieved another new record with third quarter revenues of $51.4 million
up 11% over the prior year driven by growth in all regions with strong revenue
results in Europe, up 19%. We continue to witness broad-based demand
extending the favorable revenue trends recorded during the first half of the
year. This was the second consecutive quarter of double-digit growth in
Europe, the tenth consecutive quarter of growth in the Americas and Asia
Pacific grew 10%," said Michael Connors, Chairman and Chief Executive Officer,
ISG. "Our September YTD revenues of $157.5 million were up 10%. Our strong
performance reflects the continuing success of our strategy to build a unified
go-to-market approach with strong product and service offerings including
research, consulting and managed services and our penetrating of key growth
areas including the public sector in the U.S. and UK."

Third Quarter 2013 Results

ISG reported record third quarter revenues of $51.4 million, an increase of
11% on a constant currency and reported basis from $46.5 million in the third
quarter of 2012. Revenues were $28.5 million in the Americas (up 6% from the
same period in 2012), $17.6 million in Europe (up 19%) and $5.3 million in
Asia Pacific (up 10%); growth rates in constant currency.

ISG reported operating income of $1.8 million for the third quarter of 2013.
This compares to operating income of $2.4 million in the third quarter of
2012. Adjusted net income for the third quarter was $2.6 million, up 48%, or
$0.07 per share on a diluted basis, compared with an adjusted net income of
$1.8 million, or $0.05 per share on a diluted basis in the prior-year's third
quarter. The third quarter results included $2.1 million in stock-based
compensation (recorded to selling, general and administrative expense on the
P&L) versus $0.7 million in the prior year, driven by the vesting of
performance-based restricted stock units triggered by the 115% rise in ISG's
share price during the quarter. Reported fully diluted earnings per share
(EPS) were $0.01 per share compared with $0.01 per share for the same
prior-year period in 2012.

Third quarter 2013 adjusted earnings before interest, taxes, depreciation,
foreign currency translation gains/losses, gain on extinguishment of debt,
amortization and non-cash stock compensation (adjusted EBITDA, a non-GAAP
measure) of $5.8 million compared with $5.3 million in the third quarter 2012,
an increase of 9% on a reported basis (7% on a constant currency basis). The
2013 third quarter results included a charge totaling $0.1 million for a
performance-based liability tied to STA Consulting earn-out that is reasonably
likely to be paid in the future. The 2012 third quarter results included the
release of a performance based liability tied to the STA Consulting earn-out
of $1.9 million. 

September YTD 2013 Results

ISG reported record September YTD 2013 revenues of $157.5 million, an increase
of 10% on a constant currency and reported basis from $143.2 million for
September YTD 2012. Revenues were $87.5 million in the Americas (up 12% from
the same period in 2012) and $53.8 million in Europe (up 16%) offsetting a 12%
decline in Asia Pacific to $16.2 million; growth rates are in constant
currency.

Operating income for the September YTD 2013 was $8.7 million, a $3.8 million
increase from 2012 operating income of $4.9 million. ISG's September YTD 2013
adjusted net income totaled $8.4 million, an increase of $3.2 million from the
prior year adjusted net income of $5.2 million. Diluted adjusted EPS for the
September YTD 2013 was $0.22, up 57%, compared with $0.14 in 2012. Reported
fully diluted EPS for the September YTD 2013 was $0.10, up from $0.01 in 2012.

Adjusted EBITDA for September YTD 2013 of $17.3 million compares with $13.7
million of adjusted EBITDA in prior year, an increase of 25% in constant
currency.

Other Financial and Operating Highlights

ISG cash and cash equivalents totaled $23.6 million at September 30, 2013, an
increase of $4.6 million from June 30, 2013. The increase in cash balances
from June 30, 2013 was principally attributable to an increase in net cash
flows generated from operating activities. Non-operating use of cash included
$0.8 million in debt repayments and $1.7 million in repurchases of stock.
Total outstanding debt at September 30, 2013 was $59.3 million compared with
$60.1 million at June 30, 2013.

Reaffirms 2013 Full-Year Revenue and Adjusted EBITDA Guidance

"Based on our performance for the first nine months of the year, we are
reaffirming the previously raised projections for full year revenues in the
range of $205-$212 million and adjusted EBITDA between $21-$23 million," said
Michael Connors.

Conference Call

ISG has scheduled a Third Quarter results call at 9:00 a.m. Eastern Time,
Friday, November 8, 2013, to discuss the Company's financial results. The
call can be accessed by dialing 1-888-556-4997 or for international callers
001-719-325-2429. The access code is 5213987.

About Information Services Group, Inc.

Information Services Group (ISG) (NASDAQ: III) is a leading technology
insights, market intelligence and advisory services company, serving
approximately 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.

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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, 2013 and September 30, 2012. 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, gain on extinguishment of debt, 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, gain on extinguishment of debt 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 based on an average of daily spot rates from January 1, 2012 to August
31, 2012), 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,
                               2013       2012       2013         2012
                               $      $      $       $     
Revenues                                         157,542     143,225
                               51,371     46,469
Operating expenses
Direct costs and expenses for  30,733     27,876     92,467       84,672
advisors
Selling, general and           16,987     13,957     50,761       47,052
administrative
Depreciation and amortization  1,854      2,224      5,600        6,637
    Operating income          1,797      2,412      8,714        4,864
Interest income                3          11         15           37
Interest expense               (660)      (790)      (2,108)      (2,501)
Gain on extinguishment of debt -          -          79           -
Foreign currency transaction   (29)       (76)       (18)         (69)
loss
    Income before taxes        1,111      1,557      6,682        2,331
Income tax provision           700        1,347      2,863        1,877
                               $      $      $       $     
    Net income                                3,819        454
                               411        210
Weighted average shares
outstanding:
    Basic                      36,781     36,159     36,723       36,210
    Diluted                    38,830     38,082     38,712       37,464
Earnings per share:
                               $      $      $       $     
    Basic                                        0.10      0.01
                               0.01      0.01
                               $      $      $       $     
    Diluted                                      0.10      0.01
                               0.01      0.01





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,
                               2013          2012       2013        2012
                               $        $      $       $    
Net income                        411               3,819      454
                                             210
Plus:
   Interest expense (net of    657           779        2,093       2,464
   interest income)
   Income taxes                700           1,347      2,863       1,877
   Depreciation and            1,854         2,224      5,600       6,637
   amortization
   Gain on extinguishment of   -             -          (79)        -
   debt
   Foreign currency            29            76         18          69
   transaction
   Non-cash stock compensation 2,129         667        3,018       2,191
                               $        $      $       $    
Adjusted EBITDA                5,780                17,332     13,692
                                             5,303
                               $        $      $       $    
Net income                        411               3,819      454
                                             210
Plus:
   Non-cash stock compensation 2,129         667        3,018       2,191
   Intangible amortization     1,437         1,788      4,389       5,363
   Gain on extinguishment of   -             -          (79)        -
   debt
   Foreign currency            29            76         18          69
   transaction
   Tax effect ^(1)             (1,366)       (962)      (2,791)     (2,897)
                               $        $      $       $    
Adjusted net income             2,640                 8,374    5,180
                                             1,779
Weighted average shares
outstanding:
   Basic                       36,781        36,159     36,723      36,210
   Diluted                     38,830        38,082     38,712      37,464
Adjusted earnings per share:
                               $        $      $       $    
   Basic                         0.07                0.23    0.14
                                             0.05
                               $        $      $       $    
   Diluted                      0.07                0.22    0.14
                                             0.05
^(1)        Marginal tax rate of 38.0% applied.





                                 Three                             Three
                                 Months                             Months
                                 Ended                             Ended
          Three       Constant  September   Three      Constant  September
          Months       currency  30, 2013    Months      currency  30, 2012
          Ended                              Ended
          September   impact    Adjusted   September  impact    Adjusted
          30, 2013    ^(1)                   30, 2012   ^(1)
          $       $     $       $      $     $    
Revenue                                              
          51,371       312      51,683       46,469     172      46,641
Operating $       $     $       $      $     $    
income                                          
          1,797        (59)      1,738        2,412      60        2,472
Adjusted  $       $     $       $      $     $    
EBITDA                                          
          5,780        (59)      5,721        5,303      60        5,363
                                 Nine                              Nine
                                 Months                             Months
                                 Ended                             Ended
          Nine Months Constant  September   Nine       Constant  September
          Ended       currency  30, 2013    Months      currency  30, 2012
                                              Ended
          September   impact    Adjusted   September  impact    Adjusted
          30, 2013    ^(1)                   30, 2012   ^(1)
          $       $     $       $      $     $    
Revenue                                                
          157,542      156      157,698      143,225    (116)     143,109
Operating $       $     $       $      $     $    
income                                           
          8,714        (91)      8,623        4,864      108       4,972
Adjusted  $       $     $       $      $     $    
EBITDA                                              
          17,332       (91)      17,241       13,692     108      13,800
^(1) Foreign currency rates based on an average FX rate from
January 1, 2012 to August 31, 2012 used for constant currency
translation.

SOURCE Information Services Group, Inc.

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