Information Services Group, Inc. (ISG) (NASDAQ: III), a leading technology insights, market intelligence and advisory services company, today announced financial results for the second quarter ended June 30, 2016.
"We had a great second quarter, delivering the highest revenues we have ever achieved in any quarter. All regions contributed to our strong growth, including the Americas and Asia Pacific, which both delivered record revenue quarters. Americas revenues grew by 11 percent, Europe by 14 percent and Asia Pacific by 22 percent versus the prior year, and our sequential revenue growth versus the first quarter was 21 percent. Overall, our strategy of broadening our portfolio of services is yielding significant growth, with cloud and digital services now accounting for more than 20 percent of our total revenues. During the quarter, we signed three multiyear client engagements for a total of $50 million of which approximately 20 percent is new sales. We remain very well positioned to continue driving profitable growth and delivering value for our clients and shareholders."
Second-Quarter 2016 Results
Revenues for the second-quarter were $60.4 million, compared with $53.4 million in the prior year, an increase of $7.0 million, or 13 percent. Revenues were $31.7 million in the Americas (up 11 percent from the same period in 2015), $21.2 million in Europe (up 14 percent), and $7.5 million in Asia Pacific (up 22 percent).
ISG reported second-quarter operating income of $3.2 million, up 61 percent, compared with operating income of $2.0 million in the second quarter of 2015. Included in the second-quarter 2016 operating income was an additional $0.5 million in stock compensation versus the prior-year period. Net income for the second quarter was $1.7 million compared with net income of $1.0 million in the second quarter of 2015. Reported fully diluted income per share was $0.04 per share compared with fully diluted income per share of $0.02 for the same period in 2015. Adjusted net income (a non-GAAP measure defined as net income plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses and non-cash impairment charges for goodwill and intangible assets, gain on extinguishment of debt and bargain purchase gain, on a tax-adjusted basis) for the second quarter was $3.5 million, or $0.09 per share on a diluted basis, up 34 percent, compared with adjusted net income of $2.6 million, or $0.07 per share on a diluted basis, in the prior year's second quarter.
Second-quarter 2016 adjusted EBITDA (a non-GAAP measure defined as net income before net income attributable to non-controlling interest, interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, impairment charges for goodwill and intangible assets, tax indemnity receivable, interest on contingent consideration, gain on extinguishment of debt and bargain purchase gain) was $7.0 million, up 36 percent, compared with $5.2 million in last year's second quarter.
Other Financial and Operating Highlights
On April 7, 2016, the company completed a modified "Dutch Auction" tender offer to purchase 2.3 million shares of its common stock at a purchase price of $4.00 per share for an aggregate cost of approximately $9.7 million, which includes $0.4 million in fees and expenses. ISG funded the transaction by drawing on its revolving credit facility.
On May 6, 2016, the company prepaid $3.2 million of the $3.4 million of the Compass Convertible Loan Notes outstanding in full satisfaction of such indebtedness owed by the company to the applicable payee; no gain or loss will be recorded as a result of the transaction, which was funded by drawing on the company's revolving credit facility. The prepayment of these Compass Convertible Loan Notes reduces the company's fully diluted share count by approximately 0.8 million shares; including the 2.3 million shares repurchased through the tender offer, ISG's total fully diluted shares outstanding were reduced by 3.1 million shares in the second quarter.
ISG cash and cash equivalents totaled $16.1 million at June 30, 2016, down $1.9 million from March 31, 2016. Total outstanding debt at June 30, 2016 was $60.0 million compared with $50.2 million at March 31, 2016, with the increase attributable to the additional debt used to fund the tender offer. The decrease in cash balances from March 31, 2016 was principally attributable to net cash provided from operations of $3.1 million offset by the non-operating use of cash for debt repayments ($3.7 million), acquisition-related costs ($3.8 million) and for stock repurchases ($10.1 million) including the tender offer, partially offset by proceeds from the increased draw on our revolving credit facility ($13.5 million).
ISG Reaffirms Full-Year Revenue and Adjusted EBITDA Guidance
"For 2016, we are reaffirming our forecasted revenue growth to be in the range of 7 percent to 9 percent and our adjusted EBITDA growth to be in the range of 10 percent to 15 percent, excluding the impact of currency," Connors said. "This is based on our robust second quarter and the current demand environment for our products and services."
About Information Services Group 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 and global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 1,000 employees and operates in 21 countries.
For additional information, visit www.isg-one.com.
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