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. Follow us on Twitter: https://twitter.com/ISG_News Follow us on LinkedIn: http://www.linkedin.com/company/information-services-group Follow us on Google Plus: https://plus.google.com/b/118326392175795521009/118326392175795521009/posts 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
Information Services Group Announces Third Quarter 2013 Financial Results
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