Third Quarter Revenues of $32.5 Million, Down 21% from 2008; Third
Quarter Adjusted EBITDA of $4.9 Million, Down 24% from 2008;
Diluted Third Quarter Cash EPS of $0.10 Impairment Charge of $6.8
Million Recorded During Third Quarter STAMFORD, Conn., Nov. 4
/PRNewswire-FirstCall/ -- Information Services Group, Inc. (ISG)
(NASDAQ:IIINASDAQ:IIIIUNASDAQ:IIIIW), an industry-leading,
information-based services company, today announced financial
results for the third quarter of 2009 which ended on September 30,
2009. Third Quarter 2009 Results ISG reported total revenues of
$32.5 million during third quarter 2009, a decrease of $8.6 million
(or 21%) from $41.1 million in the third quarter of 2008. Reported
revenues decreased 18% before the impact of currency translation.
Fee revenues (revenues before client reimbursable expenses)
aggregated $29.9 million during the third quarter of 2009, a
decrease of 21% year-over-year (down 18% before the impact of
currency translation). Revenues in the Americas decreased 14% for
the quarter. Revenues from international operations decreased 25%
on a constant currency basis and 29% including the impact of
currency translation from third quarter 2008 levels. Revenues were
essentially flat to second quarter 2009 before the impact of
currency translation. During third quarter, revenues related to new
sourcing transactions decreased as current and prospective clients
continued to defer the implementation of new sourcing strategies in
the face of the continuing economic downturn. This decrease was
partially offset by higher demand for contract renegotiation
support and post contract management and governance services. ISG
reported a $4.2 million operating loss for the three months ended
September 30, 2009 compared with a reported operating income of
$3.8 million during the same 2008 period. The third quarter 2009
operating loss was attributable to a $6.8 million charge for the
impairment of indefinite life intangible assets associated with
trademarks and trade names. The non-cash impairment charge resulted
primarily from 2009 revenue compression driven by the global
recession which has impacted and reduced sourcing industry
activity. Excluding the impact of the impairment charge and
year-on-year currency translation on reported revenues and
expenses, operating income was down $0.6 million or 21% from third
quarter 2008 levels. Third quarter 2009 earnings before interest,
taxes, depreciation amortization and non-cash impairment charges
(adjusted EBITDA, a non-GAAP measure) totaled $4.9 million (16.3%
of fee revenues). This represents a decrease of 24% compared with
third quarter 2008 EBITDA of $6.4 million (16.9% of fee revenues).
Excluding the impact of currency translation, adjusted EBITDA
declined by $0.8 million or 15% from third quarter 2008 levels. The
declines in operating income before the impact of the impairment
charge and adjusted EBITDA reported during the third quarter of
2009 were primarily the result of lower revenue levels in all
regions partially offset by reductions of direct costs as well as
selling and general and administrative expenses of 25% and 12%,
respectively resulting from ongoing cost productivity programs.
Reported fully diluted earnings per share (EPS) for third quarter
2009 totaled a loss of $0.11 (positive $0.02 before the previously
discussed impairment charge) versus $0.05 for the same 2008 period.
Fully diluted cash EPS (a non-GAAP measure) for third quarter 2009
was $0.10 compared with $0.13 for third quarter of 2008. The
decrease in diluted cash EPS was principally attributable to lower
revenues partially offset by expense reductions and cost
productivity. Other Financial and Operating Highlights Cash and
cash equivalents aggregated $42.9 million at September 30, 2009
compared with $45.8 million at June 30, 2009 and $61.1 million at
December 31, 2008. The decrease in cash balances from year-end 2008
was principally attributable to term loan principal and interest
payments and the disbursement of 2008 variable incentive plan
payments during March 2009. Total outstanding debt at September 30,
2009 was $76.8 million compared with $81.8 million at June 30, 2009
and $94.1 million at December 31, 2008. ISG made principal
repayments of $12.0 million and $5.0 million in June and September
2009, respectively. In addition, during September 2009 ISG agreed
to make additional principal repayments of $5.0 million and $2.0
million in December 2009 and March 2010. In consideration of the
principal repayment made in September 2009 and the required
repayments due in December 2009 and March 2010, ISG's lenders
agreed to amend the total leverage ratio for the balance of the
term of the loan to provide the Company with greater financial
flexibility. "ISG remains focused on cost productivity, investing
in new products and services, expanding our global presence,
retaining and recruiting the best professional advisors in the
industry and pursuing acquisitions to expand capabilities and
scale. Although growth in the overall sourcing market remains
challenging in 2009, ISG's third quarter revenues were essentially
flat to the second quarter 2009 on a constant currency basis. We
experienced year-on-year growth in the automotive and financial
service sectors for the first time since 2007 as well as strong
demand from companies in the retail and restaurant verticals. We
also continued to expand our post contract governance services
business and signed our first major contract in China. As world
economic activity stabilizes and corporate confidence returns, we
believe ISG is well positioned to support our clients' efforts to
lower their costs and drive business improvements," said Michael P.
Connors, Chairman and CEO of ISG. Conference Call ISG has scheduled
a conference call at 2:00 p.m. Eastern Standard Time, Thursday,
November 5, 2009, to discuss the Company's financial results. The
call can be accessed by dialing 1 (800) 723-6498 or for
international callers 001 (785) 830-7989. The access code is
4817599. About Information Services Group, Inc. Information
Services Group, Inc. (ISG) was founded in 2006 to build an
industry-leading, high-growth, information-based services company
by acquiring and growing businesses in advisory, data, business and
media information services. In November 2007, ISG acquired TPI, the
largest sourcing advisory firm in the world. Based in Stamford,
Connecticut, ISG has a proven leadership team with global
experience in information-based services and a track record of
creating significant value for shareowners, clients and employees.
For more, visit http://www.informationsg.com/. About TPI TPI, a
unit of ISG, is the founder and innovator of the sourcing advisory
industry, and the largest sourcing data and advisory firm in the
world. TPI is expert at a broad range of business support functions
and related research methodologies. Utilizing deep functional
domain expertise and extensive practical experience, TPI's
accomplished industry experts collaborate with organizations to
help them advance their business operations through the best
combination of business process improvement, shared services,
outsourcing and offshoring. In addition, TPI Momentum, a business
unit of TPI, provides information and insights to outsourcing and
offshoring service providers to help them provide enhanced services
to their sourcing clients. For additional information, visit
http://www.tpi.net/. 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, 2009
and September 30, 2008. 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, amortization of intangible
assets resulting from acquisitions and non-cash impairment charges
for goodwill and intangible assets) and cash earnings (defined as
net income plus amortization of intangible assets, non-cash stock
based compensation and non-cash impairment charges for goodwill and
intangible assets) and selected financial data on a constant
currency basis (using foreign currency exchange rates as of
November 30, 2008), 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. 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 TPI 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 TPI's 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 the Company's
revenues and may maintain sizable accounts receivables with the
Company; and (14) ability to achieve the cost reduction and
productivity improvements contemplated in the previously announced
"Value Creation Plan" and in subsequent programs. 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 ("SEC"). ISG undertakes no obligation to
update or revise any forward-looking statements to reflect
subsequent events or circumstances. Information Services Group,
Inc. Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts) Three Months Nine Months
Ended September 30, Ended September 30, -------------------
------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenue
$32,462 $41,123 $98,279 $137,370 Operating expenses Direct costs
and expenses for advisors 16,968 22,771 49,447 76,827 Selling,
general and administrative 10,532 11,934 35,647 39,482 Depreciation
and amortization 2,366 2,614 7,160 7,793 Impairment of intangible
assets 6,800 - 6,800 - ----- -- ----- -- Operating (loss) income
(4,204) 3,804 (775) 13,268 ------ ----- ---- ------ Interest income
39 307 254 963 Interest expense (1,111) (1,572) (3,640) (5,162)
Foreign currency transaction (loss) gain (107) (3) (151) 405 ----
-- ---- --- Income (loss) before taxes (5,383) 2,536 (4,312) 9,474
Income tax benefit (provision) 1,786 (1,079) 1,354 (3,930) -----
------ ----- ------ Net (loss) income $(3,597) $1,457 $(2,958)
$5,544 ======= ====== ======= ====== Weighted average shares
outstanding: Basic 31,478 31,208 31,456 31,290 Diluted 31,478
31,281 31,456 31,357 (Loss) income per share: Basic $(0.11) $0.05
$(0.09) $0.18 ====== ===== ====== ===== Diluted $(0.11) $0.05
$(0.09) $0.18 ====== ===== ====== ===== Adjusted EBITDA $4,855
$6,415 $13,034 $21,466 Less: Income taxes (1,786) 1,079 (1,354)
3,930 Interest expense (net of interest income) 1,072 1,265 3,386
4,199 Depreciation and amortization 2,366 2,614 7,160 7,793
Impairment of intangible assets 6,800 - 6,800 - ----- -- ----- --
Net (loss) income (3,597) 1,457 (2,958) 5,544 Plus: Amortization
2,036 2,212 6,108 6,636 Impairment of intangible assets, net of tax
4,140 - 4,140 - Non-cash stock compensation 563 460 1,873 1,813 ---
--- ----- ----- Cash Earnings $3,142 $4,129 $9,163 $13,993 ======
====== ====== ======= Cash Earnings Per Share: Basic $0.10 $0.13
$0.29 $0.45 ===== ===== ===== ===== Diluted $0.10 $0.13 $0.29 $0.45
===== ===== ===== ===== Information Services Group, Inc. Selected
Financial Data Constant Currency Comparison Three Months Ended
Three Months Ended Constant currency September 30, 2009 September
30, 2009 impact (1) Adjusted ------------------ ---------- --------
Revenue $32,462 $(1,912) $30,550 Operating income (2) $2,596 $(485)
$2,111 EBITDA (2) $4,855 $(378) $4,477 Three Months Ended Three
Months Ended Constant currency September 30, 2008 September 30,
2008 impact (1) Adjusted ------------------ ---------- --------
Revenue $41,123 $(3,758) $37,365 Operating income (2) $3,804
$(1,125) $2,679 EBITDA (2) $6,415 $(1,121) $5,294 Nine Months Ended
Nine Months Ended Constant currency September 30, 2009 September
30, 2009 impact (1) Adjusted ------------------ ----------
--------- Revenue $98,279 $(3,339) $94,940 Operating income (2)
$6,025 $(549) $5,476 EBITDA (2) $13,034 $(374) $12,660 Nine Months
Ended Nine Months Ended Constant currency September 30, 2008
September 30, 2008 impact (1) Adjusted ------------------
---------- -------- Revenue $137,370 $(13,491) $123,879 Operating
income (2) $13,268 $(2,821) $10,447 EBITDA (2) $21,466 $(2,921)
$18,545 (1) Using foreign currency rates as of November 30, 2008
(2) Excluding impairment of intangible assets charge of $6.8
million recorded in the third quarter of 2009 DATASOURCE:
Information Services Group, Inc. CONTACT: Press Contact: Barry
Holt, +1-203-517-3110, , Investor Contact: David Berger,
+1-203-517-3104, Web Site: http://www.informationsg.com/
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