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Technology

Software

Information Services Group Inc.

Second Quarter Operating Results
ISG had another record quarter, building from the previous quarter, as ISG is continuing to see demand for its services from various verticals such as consumer services, life sciences, health care, and the public sector.&nbsp;
ISG reported revenues of $74.6 million up from $70.7 million in the prior year, an increase of 6%. Currency translation for the quarter had a negative impact of $0.1 million. We estimated revenue to be at $75 million. Recurring revenues were at $32 million, slightly down from the $33 million in the first quarter.
 For the revenue segments, Americas had revenue of $42.3 million, a 7% increase from the previous year. Industries such as consumer banking, health sciences, media, and public sector saw double-digit growth in the quarter. The Company sees the demand environment for the segment as great.
Looking at Europe, ISG reported revenue of $24.4 million, an increase of 5% from the previous year. The segment had double digit growth in industries such as health sciences, energy, utilities, and public sector, along with ISG having double digit growth in its automation business.
For Asia Pacific, the Company had revenue of $8.0 million, flat versus the prior year. The Company&nbsp;generated double-digit growth in the Research and GovernX business. Similar to the first quarter, the Company does not expect the flatness to continue into the second half of the year.
 Overall operating expenses for ISG were at $23.9 million for the quarter. Within the expenses, SG&amp;A expenses were $22.3 million compared to $20.9 million the prior year. The Company experienced an approximately $1 million severance expense in the quarter along with a $0.4 million&nbsp;unexpected health care expense related to the Company&#8217;s self-insured status. ISG does not expect the health expense to be repeated. Operating income for the quarter was at $4.9 million, down 32% from the prior year&#8217;s $7.1 million.&nbsp;
Net income for the quarter totaled $2.3 million, or $0.05 per diluted share, down 53% from the previous year&#8217;s net income of $5.0 million, or $0.10. Adjusted net income was $5.3 million, or $0.11 per diluted share, compared to $6.8 million, or $0.13, last year. We estimated net income of $4.1 million, or $0.08.
Adjusted EBITDA for the second quarter was $10.1 million, or a margin of 13.6%, a decrease of 6% from the prior year&#8217;s $10.7 million, or 15.2%.&nbsp;
Balance Sheet and Returning Value to Shareholders
 ISG generated cash of $2.8 million during the quarter, compared to $0.8 million last year. The Company had a cash balance of $19.6 million as of June 30, 2023, down from $23.7 million at March 31, 2023. During the quarter, ISG paid dividends of $2.2 million, made $1.5 million of&nbsp;earn out payments related to the 2022 acquisition of Change4Growth, and&nbsp;repurchased $2.9 million of shares. The Company&#8217;s&nbsp;debt-to-EBITDA ratio remains at 1.8x. which is within the 1.7-1.8x the Company has been over the last 12 months, and had debt outstanding of $79.2 million, unchanged from the prior quarter.
The Company approved a new $25 million share repurchase authorization, which increases the aggregate available to $28.6 million. We anticipate additional share purchases with the new authorization in place. The $25 million represents approximately 10% of the equity market capitalization for ISG.
 Alongside the new repurchase program is the Company&#8217;s ever-present search for acquisitions, as the Company is continuing to search for companies that will expand its digital solutions like the Company&#8217;s highly in-demand cost optimization service. ISG&#8217;s new credit facility, along with the Company&#8217;s comfortability to increase debt to 2.5x gross-debt-to-adjusted-EBITDA if the right opportunity comes along gives ISG the flexibility to find the right firm to enhance its solutions, in our view. We continue to expect a tuck-in acquisition and would not be surprised if it happens sooner rather than later.&#8212;&#8212;&#8212;- page break &#8212;&#8212;&#8212;-
Projections 
 
Some one time events and the macroeconomic environment hit ISG somewhat this quarter, however ISG is continuing to show no signs of slowing down. ISG is continuing to see demand in its digital services, and we expect this to continue in the second half of the year. The Americas is showing a good demand environment, the Company expects the Asia Pacific segment to experience more growth in the second half than the flatness the segment experienced in the first half, and increased growth for Europe in the second half due to a better demand environment surrounding ISG&#8217;s cost optimization service along with other services like GovernX.
For the third quarter of the 2023 fiscal year, we project revenue of $75 million, down from our prior $76 million, the high point of the Company&#8217;s guidance. We project net income of $3.8 million, or $0.08 per diluted share, and adjusted EBITDA of $11.1 million, slightly higher than the midpoint of ISG&#8217;s guidance. We previously were at $0.11 and $12.8 million, respectively. We are taking a slightly more conservative stance on margin given the overall economic environment. Last year, ISG reported revenue of $68.8 million, net income of $5.6 million, or $0.11 per diluted share, and adjusted EBITDA of $10.7 million.
For the full year, we project revenue of $305 million, net income of $14.3 million, or $0.28, adjusted EPS of $0.47, and adjusted EBITDA of $44.2 million.

Information Services Group Inc. (III)

No Signs of Slowing Down

Fundamental Analysis:

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No Signs of Slowing Down (III)

2Q23: Another Record Revenue Quarter (III)

CFO to Retire (III)

Starting the New Year Right (III)

Inbox Intel from Channelchek.