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Edited Transcript of III.OQ earnings conference call or presentation 7-Nov-19 2:00pm GMT

Q3 2019 Information Services Group Inc Earnings Call

STAMFORD Nov 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Information Services Group Inc earnings conference call or presentation Thursday, November 7, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Barry Holt

Information Services Group, Inc. - Senior Advisor

* David E. Berger

Information Services Group, Inc. - Executive VP & CFO

* Michael P. Connors

Information Services Group, Inc. - Chairman & CEO

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Conference Call Participants

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* Joseph Anthony Gomes

NOBLE Capital Markets, Inc., Research Division - Senior Generalist Analyst

* Marc Frye Riddick

Sidoti & Company, LLC - Business and Consumer Services Analyst

* Marco Andres Rodriguez

Stonegate Capital Markets, Inc., Research Division - Director of Research & Senior Research Analyst

* Vincent Alexander Colicchio

Barrington Research Associates, Inc., Research Division - MD

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Presentation

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Operator [1]

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Good day, and welcome to the Information Services Group Third Quarter 2019 Results 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.

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Barry Holt, Information Services Group, Inc. - Senior Advisor [2]

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

Before we begin, I'd like to read a forward-looking statement. It is important to note that this communication may contain forward-looking statements, which represent the current expectations and beliefs of the management of ISG concerning future events and their potential effects. These 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. For a more detailed listing of the risks and other factors that could affect future results, please refer to the forward-looking statements contained in our Form 8-K that was filed last night to the SEC in the risk factor section in ISG's Form 10-K covering full year results. You should also read ISG's annual report on Form 10-K for the fiscal year ending December 31, 2018 and any other relevant documents, including any amendments or supplements to these documents filed with the SEC.

You will be able to obtain free copies of any of the ISG's SEC filings on either ISG's website at www.isg-one.com or the SEC's website at www.sec.gov. ISG undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. During this call, we will discuss certain non-GAAP financial measures, which ISG believes improves the comparability of the company's financial results between periods and provides for greater transparency of key measures we use to evaluate the company's performance.

The non-GAAP measures, which we will touch on today include adjusted EBITDA, adjusted net earnings and the presentation of selected financial data on a constant currency basis. Non-GAAP measures are provided as additional information, it should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. For the reconciliation of all non-GAAP measures presented to the most closely applicable GAAP measure, please refer to our current report on Form 8-K, which was filed last night with the SEC.

And now, I'd like to turn the call over to Michael Connors, who will be followed by David Berger. Mike?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [3]

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Thank you, Barry. And Good morning, everyone. ISG had a strong third quarter. Revenues of $68 million were driven by the Americas, up 5%, the region's strongest growth since 2017.

EBITDA levels were a record $10.3 million, up 17% from a year ago and 28% sequentially. This is the first quarter ever that ISG has exceeded $10 million of EBITDA.

Our EBITDA margin was strong at 15%, our best performance this decade. Our digital business, which tends to have higher margins, continues to perform well, representing more than 45% of our firm revenue. In our quest for higher margins, we continue to focus on creating more profitable products and services, including the development of our ISG platform anchored by GovernX, our Software-as-a-Service offering for managed services.

And we generated strong cash flow in the quarter, improving our cash balance by 36% over Q2. Globally, we saw revenue growth in our energy, manufacturing and insurance verticals and growth in our research, automation, organizational change management and network advisory service lines.

We have now served 614 clients through the first 9 months, including more than 100 brand-new clients.

Now let me update you on a few of our growth initiatives. First, blockchain. During Q3 we announced the launch of ISG blockchain exchange, a comprehensive research database and industry collaboration platform for enterprises looking to adopt or expand their use of distributed ledger technology. Our expertise in blockchain was recognized recently when the Head of our ISG blockchain business was invited to appear before the U.S. Food and Drug Administration to advocate the use of blockchain for track and trace solutions to improve food safety. Blockchain is part of our higher-margin Digital Solutions that represent more than 45% of our firm revenue.

Second, transformation change management. During the quarter, we were named the 2019 organizational change management or OCM delivery partner of the year by Infor, a leading multibillion-dollar tech provider of industry-specific cloud applications.

We are proud of the transformational change management work we do with our clients to prepare them for the digital revolution occurring in their business environments today. Our OCM business is projected to grow by more than 30% this year and has doubled in size since our acquisition of OCM from TracePoint in 2016.

We continue to develop and invest in our ISG platform, which will help us drive recurring revenues to $100 million. Our anchor product is GovernX, the SaaS platform we have rolled out as part of our managed services offering. During the quarter, we secured new GovernX clients, including an international cruise line and a large fast-food company. This quarter alone, we added 6,000 contract documents and $4 billion of total contract value under management, bringing our total contracts under management for clients to $55 billion.

Including GovernX, our overall recurring revenue this quarter was $18 million. Turning to our regions. The Americas delivered its largest revenue growth since 2017, with revenues up 5% versus the prior year. During the quarter, the region saw good industry growth in our insurance and energy and technology verticals and in our HR tech network and OCM service lines. We are beginning to see renewed demand in our U.S. public sector business, which we expect will pick up next year.

Key client engagements in the quarter include United Technologies, Messer Industries, Entergy, USAA and Caesars Entertainment. One of our Bitcoin success stories is the work we are doing for a major U.S.-based health insurance company. During the quarter, we continued to expand our relationship with this client, adding a major new digital transformation engagement worth $1 million. This follows on from a digital strategy project worth more than $800,000. Over the past 2 years, this client has generated approximately $5 million in revenue for ISG. ISG has also been selected to provide multitower benchmarking to a Canadian utility company. Our industry expertise in utilities played a big role in this win. Turning to Europe. Our revenues declined 2% over the prior year.

Despite Brexit noise, our U.K. business performed well, with revenues up 6% versus the prior year and up 20% sequentially.

Germany's revenues were up 7% sequentially, although down 3% versus the prior year in a tougher macro environment. Overall, we are seeing growing adoption of digital in Europe, which had been trailing other regions due to data security and privacy concerns. In our industry segments, we saw good growth in our energy and manufacturing industry verticals and in our automation and sourcing service lines. Key client engagements in Europe in the third quarter included VW, Bayer, Allianz, Munich Reinsurance and BMW. One of our client wins this quarter came when we signed a major multinational networking and telecommunication company to support their large, full-scale IT sourcing transaction.

Using the ISG FutureSource methodology, ISG will run an Agile competitive process with 8 global suppliers, covering infrastructure and applications, end-user computing and service integration. The total deal size for the providers is likely to approach $1 billion over 5 years, one of the largest in Europe in some time.

In Asia Pacific, our revenues were up 25% sequentially and 5% versus the prior year. This region has turned the corners as the government sector heats up. Key clients in the quarter included the Australian Department of Defence, the Australian Taxation Office, EnergyAustralia and Suncorp. The Australian Department of Defence awarded ISG a new 12-month contract to provide IT advisory work around sourcing transactions and quality assurance with an option to extend for an additional 12 months beyond September 2020.

Our ISG Automation business continues to perform. We expect to exceed $30 million in revenues during 2020. This is a valuable asset that's not reflected in today's stock price. We continue to believe that ISG shares are undervalued. In consideration of this, our Board recently approved increasing our share repurchase authorization from $9.2 million to $20 million. The timing and the amount of any repurchases will be determined based on our valuation of market conditions, capital allocation alternatives and other factors. The new authorization gives us the ability to increase our share repurchases consistent with the terms of our credit agreement. Turning to fourth quarter guidance.

We continue to monitor the overall global macroeconomic environment, especially in Europe, for any impact it may have on our performance in the near term. At present, we are projecting Q4 revenues in the range of $67 million to $69 million and adjusted EBITDA of at least $10 million based on increasing demand for our higher-margin digital solutions. Together with our record EBITDA quarter in Q3, this means we will reach second half EBITDA of more than $20 million, a record 6 months for ISG.

So with that, let me turn the call over to David Berger, who will summarize our financial results.

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David E. Berger, Information Services Group, Inc. - Executive VP & CFO [4]

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Thanks, Mike. And good morning, everyone. Revenues for the third quarter were $68.1 million compared with $68 million in the prior year, which is an increase of 2% in constant currency and flat on a reported basis. Revenues were $40.3 million in the Americas, up 5% versus the prior year on a reported basis. $22.6 million in Europe, down 2% in constant currency and down 6% on a reported basis, and $5.3 million in Asia Pacific, up 5% in constant currency and down 2% on a reported basis.

Currency negatively impacted reported revenues by $1.3 million or 2% versus the prior year. Third quarter 2019 adjusted EBITDA reached a quarterly record of $10.3 million, up 17% compared with 8.1 -- $8.8 million in last year's third quarter.

We reported third quarter operating income of $5.7 million, which was up $2.3 million or 68% compared with operating income of $3.4 million in the prior year. Net income was $1.7 million compared with net income of $4 million last year. Adjusted net income for the third quarter was $4.4 million compared with adjusted net income of $6.6 million in the prior year. Included in net income and adjusted net income for the 2018 third quarter was the reversal of $3.6 million in tax accruals, of which, $900,000, was offset by a charge to SG&A associated with prior acquisition.

ISG delivered a good EPS quarter. Excluding the previously mentioned tax reversal in 2018, reported fully diluted earnings per share was $0.04 versus $0.02 last year and adjusted fully diluted earnings per share was $0.09 versus $0.08 last year. Including the impact of the tax reversal, reported fully diluted earnings per share in 2018 was $0.08 and adjusted fully diluted earnings per share was $0.14.

Consultant utilization for the quarter was 68%, which was up 200 basis points versus the prior year. Quarter end head count was 1,287, essentially flat with last quarter. Our balance sheet continues to have the strength and flexibility to support our business over the long term. Net cash provided by operations for the first 9 months was $5.8 million. On the balance sheet, we ended the quarter with $14.2 million of cash, up 36% and our total debt outstanding was $96.4 million. We have repurchased $3 million of stock through September 2019. Our average borrowing rate for the quarter was 5.6%, and we had 47.5 million shares outstanding as of October 31. Mike will now share concluding remarks before we go to Q&A.

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [5]

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Thank you, David. To summarize, we are building profitable growth momentum in our business. We generated our best quarterly EBITDA ever of more than $10 million with margins at 15%. Our Go Digital strategy is working with digital revenues more than 45% of our total, and our Americas business delivered its best quarterly revenue growth since 2017. We generated solid cash flow in the quarter with our cash balance up 36% from Q2, and our Board increased the size of our share repurchase program. And we expect to close the year strong. As always, we are focused on creating shareholder value for the long term, and we are steadfast in our mission to deliver operational excellence to our clients.

Thanks very much for calling in this morning. And now let me turn the session over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Marco Rodriguez, Stonegate Capital Markets.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research & Senior Research Analyst [2]

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I was wondering if maybe you could talk a little bit more about the government work that you are seeing some strength in here on the U.S. side. Just kind of give us your thoughts as we kind of head into fiscal '20, obviously an election year at the federal level. Just kind of how are you thinking through that? And what is sort of driving the resurgence that you're seeing, at least here in the last couple quarters, at the U.S. level?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [3]

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Yes, thanks. So look, I think as we talked about earlier in the year, with all of the governor either changes or reelections that occurred. That has now began to settle in. And especially, I would say, in the Republican states, there has been a loosening up of activity levels around digitization of a lot of the state and the large, I'll call, large local government sectors. So there are more RFPs on the market that allows us to complete more. And now that we're beginning to get into certain states, once you are in, you're able to be able to look to expand and extend some of that work that goes on there.

So we believe, as we move into 2020, that our public sector business -- I'm speaking of the U.S. for the moment, our public sector business will contribute to growth, where it did not contribute during 2019. And in fact, during the first part of the year, it was down as it was last year. So we see a nice kind of movement going there. I think the federal elections will not have a lot of impact on our public sector U.S. state business during the course of 2020. We kind of had our pain, if you will, with all the governor changes. So we feel pretty good about where that looks like, the pipeline looks strong, and we look to see that as a contributing member of our growth for 2020, Marco.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research & Senior Research Analyst [4]

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Got it. Very helpful. And maybe if you can talk a little bit more on the recurring revenue side of the business here. You called out the GovernX as part of the managed services. If you could just maybe talk a little bit about the marketing push, the sales initiative that may or may not have changed. Just kind of how you're going to market with those particular services and the feedback you're receiving from the potential customers?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [5]

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Yes. So we have been investing into what we call the ISG platform, which we've discussed here on a few calls. That platform will enable us to build products off of it kind of in a much more efficient way. Our first big product on the market is called GovernX. It's a SaaS product. It helps enterprises, from a software standpoint, understand a lot of the processes with large supplier contracts. Our move to move from services to leading with a SaaS product like GovernX in the world of automation and digital, we felt this was a good move to make. So we made that transition during 2019, and we're now beginning to see good traction with that product.

We also launched a product called InformX, which is also a SaaS product. This is a product that clients can put on their systems, if you will, and load in their costs around technology and then compare it to our database of like companies, industries, peers, et cetera, all masked. They can do what-if scenarios. If I moved $100 million out of applications and moved into another area, how would that stack up relative to my peer group, et cetera. So between GovernX, InformX, we have benchmarking as-a-service.

We're looking at a potential new product in the whole sourcing area that we'll consider for 2020. So the platform will help us drive toward the $100 million of recurring revenue. Our overall recurring revenue were hurt a bit this year because our multiyear contracts in the public sector, there's just weren't very many of them. But as we move to 2020, on your question on the government contracts, those all tend to be multiyear contracts and those will help our recurring revenue in 2020 as well.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research & Senior Research Analyst [6]

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Got it. And are you seeing customers pick up, like InformX or GovernX, these ISG platform products as solo purchases? Or are they integrated to a much larger spend with you guys?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [7]

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So they normally are a larger spend. So GovernX would always -- almost every instance also has a services dimension to it. So they would have the software on-premise, they would have it -- it's in the cloud, of course, but they would have it available to them on the premises at clients like Marriott or McDonald's, et cetera. And then we would have a set of services around that and then those agreements are multiyear agreements with those enterprises.

So we have a software stream and we have a services stream. So we tend to do the software packages with services. And in the InformX case, it's with our benchmarking and assessment services that tends to lead to downstream workaround strategy then around execution, et cetera. So those are the reasons we actually have the products not only for its recurring nature but also to drive downstream business. And in almost all cases, it's a combination of software plus services.

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Marco Andres Rodriguez, Stonegate Capital Markets, Inc., Research Division - Director of Research & Senior Research Analyst [8]

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Very helpful. And then just in terms of capital allocation priorities. I mean you guys mentioned you're going to be increasing the share buyback. It doesn't look like any shares were purchased this particular quarter. And you also in your prepared remarks, talked about limits to your ability to make stock repurchases based on your credit agreements. If maybe you can kind of walk us through the thought process for capital allocation for, say, the next couple 12 -- the next 12 months or so in terms of where you're seeing the priorities? And then if you could also possibly address the acquisition landscape?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [9]

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Okay. So let me start and then I'll have David talk about the repurchase strategy. We have 3 areas, clearly, we have the debt, we have buyback and we have strategic acquisitions. Let me cover all 3.

So on the acquisition front, we are continuing to look at assets that could help us primarily, around our digital business and/or our recurring revenue stream business. So think research, think digital, think automation business. That's the complete focus we have, and we continue to have a number of discussions and dialogues in the marketplace to see if there's something that is out there that makes sense both from a value standpoint and that could accelerate growth in certain areas. On the -- so that's the acquisition side of things. On the debt repayment, David, do you want to just comment on that?

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David E. Berger, Information Services Group, Inc. - Executive VP & CFO [10]

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Yes. We obviously continue to focus to pay down debt. We're down from where we were in the prior year. Our debt balance, last year September, we were at $101 million, we're down to a $96 million, and it continues to remain a priority of the business to drive down the overall debt balance. In terms of the repurchase, with the increase in the repurchase authorization, we plan to prepare to utilize some of our cash that we generate, particularly, you notice we had good cash generation in the third quarter. We expect to have good cash generation in the fourth quarter. So we plan to increase our buybacks once we have clearance from our banks to be able to do that.

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Operator [11]

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Our next question will come from Vincent Colicchio, Barrington Research.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - MD [12]

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Yes. Mike, last quarter you had a project delay with a large-order client and some other delays. Did they start to come back? What are the outlook -- what's the outlook there?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [13]

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Yes. Vince, yes, you'll recall that we had our largest -- one of our largest clients, an automotive client, we had to bite a bullet here, and it does affect about $1 million-plus each quarter, and that will continue through the fourth quarter. As we move to 2020, that particular client, we believe, will have stabilized and the run rate that we have for 2020, will be -- have been reset with the reduction of roughly $4 million or so during 2020. And we expect them to be, if not our largest, one of our top few, if you will, top-of-the-house large clients. So as we move to 2020, from a growth standpoint, that will not be a drag, if you will, on growth as it was in 2019.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - MD [14]

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And the U.K., was the growth broad-based? Or was it 1 or 2 large deals? And is the growth there sustainable?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [15]

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Yes. So the growth in the U.K. is around digital and automation at the moment. With all the noise around Brexit, the tendency is to do a bit of shorter-term work with a lot of the enterprises not the longer-term work. But that also happens to be a little higher-margin business for us. So it helps us. So you saw the growth both sequentially and overall. We do expect the U.K. to grow again in the fourth quarter. And our expectation is, once they can work their way through the Brexit thing, that opens up the opportunity for even larger transformational work again. So we're cautious with the U.K., but the U.K. looks like it's performed pretty good for us, certainly in Q3, and Q4 looks just as optimistic as Q3 did.

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Operator [16]

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(Operator Instructions) Our next question will come from Marc Riddick, Sidoti.

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Marc Frye Riddick, Sidoti & Company, LLC - Business and Consumer Services Analyst [17]

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I wanted to sort of follow up that thread -- moving over to Asia-Pac and I wanted to touch on one of things you mentioned as far as the pickup of government activity. And I wanted to get a sense of, if you gave a sense of whether or not that was something that was stimulated by maybe somewhat easing potential tensions? Or was there any particular specific driver in that, that was behind that and if you think that might have legs going forward?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [18]

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Yes. So I think, Marc, our view in the Asia Pacific region is, if the government work is there, we have opportunities to really grow that business over there because it represents a nice chunk of the overall size of the market. I think it's opened up because there's been such instability regarding the government leadership in Australia literally over the last few years, they've been through a few -- as you well know, a few Prime Ministers. That seems to have now settled down. And once that has settled down, we now see an opening up of workloads that were not there before with all of the uncertainty and the changes that kept occurring at the federal level in Australia.

So we saw some opening up, we saw the Department of Taxation -- Australian Department of Taxation. We saw a few other departments and some contracts that were issued for us. And we actually are optimistic about the government sector as we move into 2020. So unless there is other -- some type of other change relative to the government, which there has been a lot of the last few years, we think a bit of stability helps take out uncertainty and that opens up opportunities for ISG.

So we're cautious, but we believe that, as we move to 2020, that should be a good opportunity for us and our Asia Pacific region then would return back to what I would call more normalized growth.

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Marc Frye Riddick, Sidoti & Company, LLC - Business and Consumer Services Analyst [19]

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Okay. Great. I wanted to then switch gears and sort of follow-up and maybe get an update on your views on recurring revenue as far as the business mix and what we might see there whether or not maybe the near term might be a little bit more project specific with recurring revenue growth to come in 2020 and beyond.

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [20]

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Yes. Thanks very much, Marc. So on the recurring revenue, yes, I mean we were held back a little bit on our growth rate on recurring revenue this year primarily because we didn't have the government sector contracts that are the multiyear contracts that help our recurring revenue. But we had good strong software licensing sales that included things like our own GovernX, our InformX and recur also in terms of license sales around automation with Blue Prism and Automation Anywhere, in particular, UiPath as well.

Our benchmarking-as-a-service business, we have a pricing software product out of the market now called ProBenchmark, which is also a subscription-based product. And our research business is also from a subscription standpoint, also we should see a nice lift in 2020. So when you combine all those factors, you also get the government contracts not holding you down in terms of being a reduction, which they were in 2019, we see that then helping not put a drag on the growth rate on recurring revenues. And we can then continue our journey toward a $100 million of recurring revenue, which we would like to achieve by the end of 2021.

So we are -- we feel very good about that. That's all on the organic standpoint. We continue to look at some inorganic capability around recurring revenue as well. But I'm just talking right now about organic. So we think the recurring revenue streams should pick up growth rate back to double digits in 2020.

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Marc Frye Riddick, Sidoti & Company, LLC - Business and Consumer Services Analyst [21]

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Okay. Great. And then the last one for me. I was wondering if you could give a quick update on the -- what you're seeing on automation? And where we are [runway] -- I think we were like about close to $30 million, if I -- last quarter. So maybe if we can get sort of a quick update on what you're seeing from a customer adoption on automation because it seems as though there's a long way to go there as far as opportunity?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [22]

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Yes. Okay, good. So the automation business continues to be red hot out in the marketplace. This is our -- you'll recall, our robotic process automation. Now we're doing some cognitive work as well. The market continues to have high demand again. It is still early innings. There's a lot of adoption going on by enterprises. Not many have gone to "scale" yet. So we see that as real opportunities for ISG in the automation market overall. You've seen some of the big valuations with UiPath and Automation Anywhere, and Blue Prism's public over in the U.K. So there's the -- they've got some very strong, if you will, valuations for the software companies.

We also see, on the advisory side, such as ourselves, we also see that, that marketplace still tends to be quite robust out in the market. This is why we have a little bit of a frustration around not recognizing the value of this asset inside our stock. So we'll continue to look at ways to unleash that. So we're very confident in our automation business. We will not be at $30 million this year, but we should be, as I mentioned earlier, we should see that $30 million number plus during 2020 as that is a business, as you know, we started essentially from kind of an emerging startup in January of 2017. And we've got ourselves in a nice position there. So we expect that business to continue to deliver double-digit-type growth for us, but we'll also be continuing to look at how we can unleash the value of this asset that we think is undervalued in the market today.

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Operator [23]

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(Operator Instructions) Our next question will come from Joe Gomes, NOBLE Capital.

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Joseph Anthony Gomes, NOBLE Capital Markets, Inc., Research Division - Senior Generalist Analyst [24]

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Just a point of clarification here. When you were talking about the potential for doing some repurchases on the stock, you said, once you have clearance from the banks. If you could just give a little more color as to what do the banks have to sign off on in order for you guys to get more aggressive on the repurchase program?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [25]

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Yes. So if you'll recall, right now, the agreements we have our banks is we can buy back $3 million a year, which we have done. Once we achieve an EBITDA ratio to debt of 3x -- under 3x, then we have the flexibility to do what we'd like with our cash.

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Joseph Anthony Gomes, NOBLE Capital Markets, Inc., Research Division - Senior Generalist Analyst [26]

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Okay. And then maybe you could clarify something for me here on the public sector. Last quarter, we -- you talked about -- I think it was 13 contracts that you had been signed on the public sector and then you expected to see them contributing to revenue here in the second half of '19, but now it seems like you're being a little more modest on their contributions and what is happening here in 2019. And I was wondering if, again, you could just provide some more color or detail of what's going on, on the public sector side?

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [27]

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Yes. No, no, no, I didn't mean to be modest. We do have those contracts. They began during the third quarter, they will then go into the fourth quarter. But what I was saying on a full year 2019, because the first half was down, we will not see growth overall in the public sector, so it held us back on overall growth. So no, we see that market picking up, as I stated, and we have those contracts signed. There are a few others that are out in the market today that we are pursuing. So as I said, I think we will be able to see the public sector give us -- on a full year basis in 2020, will contribute to growth, whereas, this year, it did not contribute to our growth, it held us back. That's what I meant.

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Operator [28]

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(Operator Instructions) Well, speakers, at this time, we have no further questions in the queue. So I'd like to turn this conference back to Mr. Connors for any closing remarks.

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Michael P. Connors, Information Services Group, Inc. - Chairman & CEO [29]

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Thank you very much. Well, let me close by saying, I'm energized by the great enthusiasm our employees are showing for our future. As I travel around, meeting with our employees and clients, I get a real sense of the forward momentum that we are building as a firm and the excitement our people have for being part of the digital revolution that's transforming the world's top enterprises for operational excellence and faster growth. I want to thank all of our professionals around the world for their contributions to our success. And I want to thank all of you on the call for your continued support and confidence in ISG. Enjoy the upcoming holiday season, and have a great rest of the day.

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Operator [30]

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Thank you very much. Ladies and gentlemen, that does now conclude today's conference. You may disconnect your phone lines, and have a great rest of the week. Thank you.