Information Services (III) 9 Nov 182018 Q3 Earnings call transcript

Good day, and welcome to the Information Services Group 2018 Third Quarter Investor Conference Call. Today's conference is being recorded, and a replay will be available on ISG's website within 24 hours. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Barry Holt. Please go ahead sir.

operator. you, Thank morning. good Hello and My name Barry Holt. is a Communications at Executive ISG. I'm Senior to I'd ISG's Third everyone Quarter to like welcome Conference Call. I'm Executive Chief Connors, and joined Chairman and Chief Michael today Executive David Vice Officer. Financial Berger, and President by Officer;

Before subject and statement. is future we management to beliefs communication contain effects. potential of risks These important are forward-looking represent which ISG results this It forward-looking their that the and begin, statements, could to and note of are those the anticipated. that a like may to I'd read events to current of future uncertainties concerning results differ certain from not and statements actual guarantees cause materially expectations

refer the and SEC, contained listing a statement in that that to in full detailed our For XX-K Form please Risk results. furnished the other ISG's the the risks to more Form this morning covering X-K, forward-looking could of section factors Factors was and results, affect future year

read supplements on and any also annual with XXXX, documents, any including should report relevant these XX, for or documents amendments Form the year the filed December other ISG's You to fiscal ending SEC. XX-K

obtain be ISG's filings www.isg-one.com any or revise or either to subsequent of You able statement reflect SEC ISG at website free events or circumstances. obligation ISG's of website at SEC's update to will on the www.sec.gov. to no copies undertakes any forward-looking

as as comparability of improves measures key are touch substitute net the data for we evaluate call, the provides for results GAAP. we earnings include currency measures a The in information, the be believes isolation this should will financial prepared financial today financial During selected not provided and basis. or of with performance. in on non-GAAP to ISG Non-GAAP considered EBITDA, and accordance results financial the a constant adjusted presentation measures additional adjusted discuss company's used non-GAAP of on periods will which company's certain transparency greater and which between measures,

on reconciliation be presented measure, the to the over will Berger. turn Connors, closely by most the filed Form applicable which followed refer I'd And SEC. all this Mike? to with For like of was non-GAAP report Michael measures to X-K, please call the who David GAAP current now our to morning

Thank morning, will results, on you full third key brief everyone. you, forecast. good update Barry, our and operating year and record we on client review Today, you highlights quarter and our our

Let our me and review some metrics. key progress

responding including to for Our and go more ISG digital ISG than solution. continue strategy continued firm client in our this investments to area engine We're Blockchain Now with the working. is be growth launching XX% automation representing solutions Digital demand revenues. recently business total a our of building

the we already Automation these is partnership will and moment. two in reflected RPA third number a which Blue with to services is number partnerships Prism. for enjoy demand This addition largest a software provider. formed in providers, an market the the cloud ISG discuss the I the of our Moving recently services. run revenues growth XXXX. in business late startup of rate workloads $XX areas is in automating automation to and strong most That's processes the automation reflected in two significantly important our We digital from phase for clients. XXXX track up our of on transformation are produce and valuations UiPath Strong and one of million to the automation software with Anywhere companies,

a our comes this in rate with services digital indicating Germany, by as demand strong and grew stronger growth our a way $XX a years. million environment, accelerated contracts Our particularly $XXX European reach this on to US more a public year. growth significant of multi-year France. million demand XX% our progress With year to Nordics despite for nearly within This run robust sector revenues in decline the Europe's on transformation recurring revenues our services. than are three the goal

manufacturing XX% the we of up quarter, In in We our the are first full $XX months up million sectors cash our about in two industries, nine growth for insurance biggest of terms used expect $XX XX%. and by million reduce million our debt year. and $X to the

strengthening more put our us position in results the in Our March. announcement year-end financial share line should following repurchases resume to substantial of

per share the over up adjusted of share per Our $X.XX $X.XX GAAP earnings was earnings XX%. year of and was prior up $X.XX

for margin or quarter the level recent in XX% margin was higher. are fourth five reached acceleration. Out We last quarters pleased time this the the our have with EBITDA we

were by a million being market at Revenue engagements our Americas timing $XX softness public in year. growth prior quarter of and in completed. third number the Our network a continued even with delays the impacted revenues and was sector

We see network expect much revenue to in the quarter. fourth of this

Our this component above sharing flows gain normally network business per average generates that To remind after margins. a you includes carrier contracts signed. business are through

to times quarter, seventh revenues due number nine at the has clients months clients. exceeded nature almost be the the ISG discussed the is work bit the the however So tradeoff stronger XXX we've uneven. a in as of eight served the XXX past which much of can in the during clients past XXX. The we time margins. Through first in served quarters

on is sourcing continued on near an industry industry savings overall have building the for as both potential cost with business term we than customer The and good based XXXX. growth expansion. of news enter our business to experience ISG only digital rather emphasis overall and Our pipeline growth good

valuation cloud to beginning In move the center to to growing our dividends. into digital billion the to work our pay $XX the to and expect continue transformation due of we infrastructure are in is the move expect Valuations numbers. in of that We digital services. rise of Clearly fastest in this of automation joining come UiPath half be and XXXX by Automation XXXX quickly decision sector. contracts in September is business increasing and clients journey end to Blue up from nearly the of announced valuation in raised million billion RPA firm completion with, billion Automation publicly X.X March. the a cap partner XX on of software their of Series signed at and revenue XXX billion around which funding just has we at partner Anywhere another million. raised million billion $X C X.X of in the in a $XXX months market Prism, July, excess trailing a in XX putting $X.X traded valued UK

Many now on these shareholders. run for companies our nearly to been We revenues phase revenues and The automation subscriptions. RPA automation processes with a XX% ISG These trouble our enterprise able They ISG's wall in valuable part software increased few to have XXXX. XX have A but XX becoming by software with after automate three million hit a automation partnerships to recurring rate pace in in revenue services of XXXX struggling recurring recent is and software subscriptions X.X. wide to driven scaling have deliver since of with the automation all adoption, is ISG business, software Bot automating of our from that XX ISG across are we more providers. business ISG for firm our many organizations study shows successfully, startup call increasingly automation have at what processes. combination the enterprise. of late the

automation journey. an of govern lies by Excellence value creating automation dedicated Our to supporting and RPA roadmap their clients in a Center

to As September first Future their increasing in we organizations. their of must support ISG adopt digitization the Chicago. a Networks ever In range clients digital they held our technologies, also our of networks Summit consider upgrading

the Our the of the for experts cloud. moving network bring defined key software addressed using issues to future to the network networks the including into

advisory Blockchain. processes technologies and talked One to the least of most ISG ledger is and sourcing and enter of launch improve the digital business This enables accuracy perhaps technology. distributed about new prize Last efficiency, Now. understood their through the solution of we announced the month security clients Blockchain

Blockchain used chain supply contracts in as cryptocurrency, smart being Beyond is logistics, management, and areas more. such

for manufacture running currently the are chain of service coordinate building using installed supply systems global proof with a equipment to Blockchain between streamline smoothly. the owners We interactions company, on and base technicians and keep the concept to working building the of

now automation with stream create business for in entering over technology but expect to our chain few years. cases with use the We block when as is main clients more even evolve the next to ISG becomes arena over time, this preparation

we in up versus our line prior regions, revenues XX% quarterly the year in our to Europe QX. with million reported revenues turning Now of record $XX and in

quarter Our performance reversal also this is a trends. of historical

slower As typically you is vacations Europe's to summer months. in third due QX the may quarter during client recall

will to of cost public ISG project for support the included building However, a revenues $XX technology, plus mentioned end-to-end Volkswagen, million digital development US aircraft Caterpillar, manage third engagements future Among client Nordics. especially manage manage the $X principally Bell quarter transformation sciences ISG program and strong network and demand large Ikano significant UK in a due services insurance service [indiscernible] major clients during quarter million Key I and a saving $X engine our Europe strategize under digital business business data in initiative. our XX% systems the IT also transition trend saw verticals. revenues with earlier. library the third to power family. engagement another their over supporting manufacturer for the Entergy, down our company. a won complete digital in to and software this for services BMW. client oriented France information and growth very the and in reversed and BASF, Bank shared for the wins quarter Humana, during been Canada Americas transformation the growth the engagements our with products In Europe IT the the Overall continued and softness timing quarter, a X% Key project of were Fresenius, in design transformation, of aimed good in program with ISG manufacture selected included platform AIG. million the Exelon, landing the life European Bayer, the energy at IT model. of Nordics the in creating sector we based operating central manufacturing, and all won we and the developed In has Germany, center unit product a piece finalize in the product

Turning management major a engagement the successful $Xmillion a with major to of strategic has with relationship We recently utility. that engagement a change US year Americas. entertainment a began extending a than in multi-state services $X also ISG client agreement more sourcing few company, for been a selected organizational wins notable a OCM or by ago. an our million managed signed

X.X a in applications, X.X of workplace supports were sector covering won This down organizational a engagement Australian transaction Treasurer due services, accounted Asia Key new services regenerating become also lost a clients of Morrison ISG. includes Home turmoil ISG a prime large Shifting client's source Holdings, of control Scott our Liberal to a future engagement as of sixth federal in our Turnbull million in ecosystem. vertical such Department Toll the engagement which Qantas, demand the technology the third quarter the XX infrastructure in and after Our has political insurance minister years in $X with company Australia's the public Malcolm Group program created with revenues The management and slowness workplace Affairs, Westpac. impacts to global the of of ruling the and United Insurance shortfall. transition Party, majority ISG management. included based million States. sector Australia for including pending transformation services change Pacific, part region

develop corporations quarter one in was selected and mining combined and ISG global for a world's of human that strategy largest to company. by the During the resources region the payroll metals

services our on we based a profitable EBITDA, in guidance, of best addition QX our revenue continuing of networking demand in the which quarter in creating of expect are engagements digital more revenues and for and ISG. revenue history for the to from terms delayed our turning mix our adjusted Now, both all

year will experiencing markets. full to XXX sector we softness million year in As are and we million EBITDA public we guidance revenue adjusted result our confident remain guidance to are the to XXX updating a we full achieve the our reflect

revenue our in late as Finally, recently returned your meeting the growth. over of We offsite reaffirmed a well held automation recurring strategy digital, continued annual things October. including team as direction weekend its continued focus around all our ISG our from strategy expansion management on business

our by are $XXX to financial let for firm turn targeting me exceed over revenues XXXX. summarize revenues to the million that XX% of call digital Berger who end months David recurring XX to our We reach With and the within results. will

Thanks Mike everyone. morning good and

same revenues with Third $XXX,XXX. revenues $XX.X the Asia of by quarter Currency compared was flat from million million million XX% in and currency year. and Pacific, up in or Revenues on the X% were Europe X% a X.X in impacted prior down period in in which XXXX, reported in million prior the $XX Americas, $XX from were the negatively a constant reported year, X.X XX.X basis. million X% decrease down

X.X was XXXX prior EBITDA quarter the Third adjusted X.X year. million million versus in

for reported in up Our of XXX% $X the the income of million income over net quarter year. X.X net the was million prior

share per same in accruals income Our share a a Included quarter period acquisitions. income offset earnings reported diluted of net a per was the diluted quarter reversal charge X.X Quarter quarter the X,XXX basis million by the third for the million income for with for end share a was up income Adjusted compared diluted third were net XX% in in basis more SG&A or fully was the third per million prior XXXX was net for the year's with of share was headcount of $XXX,XXX XX%. per $X.XX on $X.XX quarter. for X,XXX adjusted prior $X.XX on XXXX. to than compared versus fully the in in tax diluted $X.X of $X.XX of the which $X.X June. Utilization or

invested X.X million contingent prior in capital million We We $X.X in Through we associated nine paid the term. last paid Net to year. million shares the purchased million business first strength cash provided by versus the to and months nine million X.X $XX.X consideration continues million sheet balance for support have $X.X flexibility in our Our in acquisitions. operations first XX.X long- with months expenditures. debt. was and over the

sheet, the debt. $XX.X in On of $XXX.X quarter with we ended million cash million balance the and

line results As earlier, year-end our the us in Mike financial following of in share puts substantial more indicated improved repurchases position to our resume March. announcement

the to remarks for go rate XX.X concluding share will as Q&A. borrowing we was XX. had Mike X.X% of average outstanding and million Our October quarter we now before shares

longer revenues engine year first with summarize, operating an through almost of margin revenues Digital acceleration the two ISG strong business are To our of we and past revenues a pleased expanding delivered the Thank over full QX in in margins momentum you, EBITDA are quarter. growth representing be million. David. continues And That recurring term months a million. our the Overall revenues rate year our and XX% EBITDA EBITDA continuing into remain automation our to $X about we and the nine translated of services XX% optimistic million of our for over XX future. full run years. of software with $XX and

our Our year-to-date recurring year million. revenues reached nearly $XX million on target the way three to of$XXX

terms was expect continued year our during revenue repaid EBITDA. up of shifted up versus the for Our the fourth million full $XX cash And services, network in in months digital anticipate be with debt $XX GAAP our the revenues adjusted share both our the quarter this we and million million quarter EPS nine million the year. time into in best history prior QX year. earnings of growth $X.XX at XX the versus to adjusted and of generated and X We last and We per first the XX%.

let Thanks are As revolution. X,XXX any in and operational lift the to turn on over we team for focused long-term the to solid. revenues, of ground me excellence morning foundation operator the [ph] Overall, our of including always our a talented in this our middle are and services, clients. steadfast value session shareholder questions. we mission remains very clients digital of to chip in calling Recurring for professionals deliver digital the automation on blue global adhesive the creating the much for and

Sherbetchyan Riley take FBR. We'll question from first B. [Operator Sarkis with Instructions] our

for and morning thanks question here. taking my Good

Sarkis. morning, Good

some on one line the the the line for of So just kind growth with ask plan you to clearly many range, you perhaps top about take remind just call mid some just top the I the recurring suppose midpoint digit color if the guidance, then represents quick do the about consolidated of and there acceleration different algorithm of growth it growing I layers single It bucket, the Is growth expect revenues here. range what business still business? communicated. please? in think it expect just be you to annual if a Can the us X%

single are be is business this year quite but growth there targeting to commercial in digit we organic our we that see the for high basis would we a on so Yes, public yes and strong, so not expect would sector XXXX.

would thoughts margin it Understood seems like and you nicely, go? beyond, ramped we and as you the as business, rates run kind around the look the profile could any where kind to where expect component margin profile XXXX it are today to growing revenue of we recurring of accelerate just of at automation from the

like think got of would over EBITDA points good least now we would X the way. trajectory. trajectory planning our through XX see we margins. couple year XX We of within we can to we to we're A at years XXX at we three have Yes, XX% process. hope our years I ago continues, XX, we improvement including to kind going think investments We've get three were along the but that's period of that make basis that and that to

us kind you'd would you're anything and comes on, to the about some stay understand that and/or there kind on kind where either of just accelerate back? investments it current or that you trajectory Got see of kind be the the accelerate of pull of opportunities help

automation. can intelligence than XXXX of think here bit a with them quicker expect our little of So a recurring probably we going pace XX% pretty digital in Blockchain a investments, at we kind if drive now with digital that like to state where that would faster investments accelerate maybe steady Clearly on might artificial we've help like takes our area. our moves we what and making I our we're did that it are revenue now - good hold faster. We XX% investments in in Blockchain got revenue. the we if

are models that some those around are segments, when accelerators are in I there business which all there So in technology disruption whether for and is digital technologies would disrupting good many transformation say industry news ISG. or

me. back That's all thank and you. I'll for hop

you. Okay, thank Sarkis,

We'll Research. Vincent with Colicchio question take Barrington next our from

round to growth Mike, Do delays a as of ask network measured forward? the I'd delays. last had causing business like what's here. Yeah, several about you that this see And going you business you

Yeah.

Vince. good So morning, -

about physically it network Our that's the when the at is network by until third not largest because have spend and that Those fees years jewel good, basis market we the gain standpoint shares dictates acquired get it's from margins. or those white business when on mentioned so a only put get gain normally base, the that Aldridge ago, time is necessarily business do inside engine that component a our basis. firm at fit mean signed share but into and we overall of I growing, new business database quarterly is also recorded space what risk not success we two the is the fee a We us, I large that it's as us growth relates not was do and average think carrier this believe The package, for network the above for signed contract ISG it but nice a we a have a an and world's called but now we to it's network. I corporations. have uneven largest is strong it

business very but in quarters. does the frankly because are a looking in had, it little good we unevenness So it's accelerate bring that that of we've to and a success XXXX business

full QX moved this may You these higher firm with with a on year business happen QX great overall stuff growth things had business, in little but basis than it's that just we recall, average to a margins. and

the indication making? quarter. that their was could healthy that on I your whatever business - - see UK any have signs may curious is decision from in I'm an had the European a impact Brexit there clients

financial automation strong we question, what that digital growing consumed go is for really and institutions there, the - is quarter particular matter that business being occur, perspective the look in is may year-to-date, happens from seeing with of so our Europe UK because Brexit what very some retail, standpoint. is double by the their the by our to in very overall them good strong disruption going are automation no that So digit

So and the both UK I it's the it disrupt I and of that us think we and mostly life we will to helping occurs. think shorter financial while for this services call institutions Europe think for course disruption - be sciences. looking be think us felt term we market, in the believe I going solutions think what applications and because in healthcare continue But they're may but it I probably

the to they Brexit be spending So some XXXX unlike shock when disruption, yes, and first going but there is of altogether. hit stopped

unfolded decision made we and there to we Europe through are expense us and resource it the that the keep Brexit with seeing recall, in all we may results would in anticipation of the that people and and have as the You our UK. thing benefit that

but So yes, with it services on year. going some advantage and clients, it expect ADM this and next to there be to disruption us serve again year to view that could our our we to has is

on And US thoughts where sector? last the in then improvement question, my we may an see public any

the the the and the there cycle the over governors. been uncertainty quarter including is and seeing was sector I over, decisions especially So across with market in think during I there states the we've this think where slowness electing year election public was issue for XX

Arizona Kansas, for and Texas and election. which So coming Illinois include up our and Michigan of had portfolio and all governors Florida,

year. governors uncertainty. maybe 'XX of normal and So see complete our the the back a done more for us, to in planning be that year, decisioning hope may whoever is public behind now eliminates cycle but will we The is next in the lot will hope haven't is go midterm that sector, will be they that our our XXXX rebound a we state

it that's Okay, me. for you. Thank

Okay. Thanks, Vince.

Stonegate Capital We'll take Markets. our with Rodriguez next Marco from question

taking guys. Good for morning questions. my Thank you

Good morning.

that were for delayed networks if wondering revenues services? the Good can network in you quantify morning. was the I -

the got quarter. - that around from quarter shift fourth $X Yeah, into will third million the that it's

Got US type it states public I 'XX, want the spending? than rather kind to understand business up and on of better you here in sector, more federal aligned then question the for of kind on so prior the following with is that just fiscal government

our Yes, or no is all our - state in either fact local business federal. of all of Marco

business is with our aligned we So state Fort like directly local federal or sector all it in states the but municipalities not so do Texas, Worth, operate is driven. the or large Jacksonville

could understood, then of shifting looking Got on a one growth into fiscal a I a 'XX growth asked sounds growth here bit the expectations Pac. in to you're single was more maybe terms kind it Americas you you, of first Asia like profile prior also When a rate. questions about upper Europe normalized that the your little wondering then for digit you kind answered question, maybe had and rate. expecting of of talk

that's does but on around public will pressed there to probably moment down digit So the is think be Marco. on our at that's growth would Europe and dependency level governments with despite single can business. been disruptive it. sector Asia it's will US if next out going double there with to service is digital The a that one there have for rate how call, is yes, US the Brexit growth on in a changes we give Europe, keep to spending quite on a to horn on rebound the expect you the high year, Australia. then Pacific, noise. to It a over year business us somewhat depend going early based next little I'll chunk in in work understand it's to all until it's we of in going a - digit hard continue the the the rate on blow And a the that Canberra that the I then, I'd play so bit; up federal

Understood.

this and add well The Germany did is on business I growth XXXX ISG business. year helps that which see in in Europe. us of into automation, automation with we our helping only should would earlier begin our launch is as maybe European as also other part thing our We that to

all sure Got I you of apologize. caught and not I if I'm this

them the sort to this if provide about of scaling there them kind with of some mentioned with guess and troubles that clients business. little I had automation moving not having scale will. Can X.X an of more you color You the maybe what's certain that something are Bot for a going or issue a around statement of you past to technologies is available points and

begun process so view the our of automation that way robotics which the portfolio our Yeah, in we think is clients kind of approximately research approximately we show XX% business have the of and the the might are that begun processes part for be have be might might few most be might of five, a and a XX it concept, automated, proof been exceptions. be there few

early Financial for meaning, major and our industry is faster handful making we taking those most part dozen bank almost adopt so rationale here, beginning the every to outsourcing very early that a organizations some to of the first about scaled you change. chase of other Scaling the inning stages, clients they of ago, pace a be the adapt are and seeing XXX vertical just services or inning, - pace, any more what second years robotics. still to processes For just down into still And so a clients. the scale XX the it's is or all them But on like for if are still may have most part changes. and process XXX, degree. of not - it's it's stage most XXX, a

automate credit this scaling that that. talking a I've saying, digital always when and processing That's to transformation to major You're tend done scale will about hey or to I'm But now and happen. look, company, going so card my I'm think they we take we automation to not will processing have X claims and business then my seen we handle and have then a the going do a small way labor they continue start for it accelerate.

we're and million will now XX, us be very a So you to range. to $XX the as good it's up of for in kind know it started going the business we

that's see has we're So RPA bright that so why scaling whole stages what that we that's that occurred we early the is in such and still think not going future yet.

Thanks your a lot guys. I time. appreciate

Okay, Marco. Thank you.

We'll question next take Gomez with Capital. Joe from our Noble

Good morning.

morning. good Hey,

down you on of year. job have Just done this debt level debt a paying great the guys

If down could be are remind you us trying debt get what guys you with? level to comfortable just to

comfortable do the we're level. leveraged up the deal. We slightly at Well, current Altridge to

down we Again [ph]. million a would paying Altridge current see As EBITDA you of around debt through be at debt times we that we're comfortable the to seller payment noted quarters level. down included million but level, of $XX would $X We commented as the we've been to gross targeting successful three level. driving X.X that down

then to maybe Okay if more. just on just us and amounts have back remind could of whether the - buyback, left looking on what are decide what should start you on kind you were if that the on and by at the buying metrics you're you to you be

Yeah.

of of evaluate our at current We uses We $XX have time. cash. outstanding billion authorization the

cash to main of down Our pay uses are debt.

cash, is for the offering those evaluate items. our enhance then within look that on bolt buybacks so and continue our third We - share component of service use acquisitions of to three would acquisitions we that

great. Okay, much. very you Thank

Marco. Thanks,

time. It are questions appears at this no there further

excellence a achieve growth let our our Okay, thank strong X,XXX especially for me continued their is by great to your in transformation confidence digital world. firm reason around professionals of you through the ability to help saying performance. operational have Thanks you call day. the faster for our close It our and be to to clients continues and support all that on and and the

for you participation. Thank call. today's your concludes This

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