Q1 2021 Information Services Group Inc Earnings Call
Good day and welcome to the information services group first quarter 'twenty 'twenty. One results conference call. Today's conference is being recorded and a replay will be available on isg's website within 24 hours.
This time for opening remarks, and introductions I would like to turn the conference over to Mr. Barry Holt. Please go ahead Sir.
Thank you operator, Hello. Good morning, My name is Barry Holt I'm, a senior communications executive at ISG I'd like to welcome everyone to Isg's first quarter conference call.
And today by Michael Connors, Chairman, and Chief Executive Officer, and David Berger Executive Vice President and Chief Financial Officer.
Before we begin I would like to read a forward looking statement 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 statement contained on our form 8-K, which was furnished last night to the SEC and the risk factors section in Isg's form 10-K, covering full year results.
You should also read Isg's annual report on form 10-K, and any other relevant documents, including any amendments or supplements to these documents filed with the SEC, you'll be able to obtain free copies of any of Isg's SEC filings on either I S.
She's website at Www Dot ISG, one or the SEC's website at Www Dot FCC.
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 used to evaluate.
The company's performance.
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 and should not be considered in isolation or as a substitute from financial results prepared in accordance with GAAP.
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'll be followed by David Berger.
Mike.
Thank you Barry good morning, everyone.
This morning, I will review our record first quarter results.
From my guidance for the second quarter.
And discuss our initiation of our first ever quarterly dividend.
ISG is off to its strongest start in April.
Last year, our clients from dealing with the crippling attacks on the on Panther.
Jimmy.
This year, while the pandemic is far from bulbar on.
Clients across many industries are now increasing their digital investments.
Moving beyond their initial COVID-19 cautiousness in anticipation renewed growth.
This rising demand for all things digital.
Coupled with the benefits of our new ISG.
Operating model and our disciplined operating approach.
As reflected in our record day revenues and profitability in Q1.
All results across the board.
Needed expectations.
Q1 revenues of $67 million were up 7% over the prior year.
Moving the impact of Gullible T D, which was near zero with a ban on travel.
The growth would have been even higher except for the fact that this year, we had no in person events.
Which generated $2 billion in revenues in Q1 last year.
We saw good growth in the Americas and Asia Pacific.
And Europe continue to perform despite continued lockdowns in the region.
Our recurring revenues reached $21 million a quarter.
And represented 33% on wind power.
We achieved record first quarter EBITDA of nearly $9 million up 2.4 times versus the prior year.
The impact of ISG next is reflected in our adjusted EBITDA margin.
Which was 13% versus 6% on the prior year.
And in our consulting utilization.
75% for the quarter up 700 basis points from the prior year.
With a focus on delivering <unk> solutions.
Solutions.
Our ISG IMAX global delivery network.
<unk> also is helping drive increased revenue.
Our balance sheet has never been stronger.
We generated record first quarter cash from operations of $12 million.
And our quarter end cash balance of 48 $6 million.
It was up to eight times versus 17 4 million from the prior year.
And our debt balance was down 11% versus the prior year to $78 million.
With a net debt to EBITDA ratio now under one.
Clients are turning to ISG and increasing numbers looking for expert advice and guidance.
On how our re accelerate their digital transformations.
Out of the pandemic.
In Q1, we served 483 clients.
11% versus last year.
Of that total 66 brand new to ISG.
An increase of 25% year over year.
All one in a work from home selling environment.
Now turning to our regions.
The Americas delivered a terrific Q1 performance with $38 million of revenue in the quarter up 7% versus the prior year.
When you exclude the impact of COVID-19 Muni.
Our discussion on regional results in Europe, and Asia Pacific Likewise, what's going on T D.
In the Americas, we saw double digit growth in our insurance.
<unk> Sciences and consumer services vertical.
With automation and network services.
Like double digit from a service line perspective.
Key client engagements during the first quarter included USAA.
The state of Louisiana.
After me on healthcare.
Family Black and Decker.
Jose.
Iron Mountain and Epsilon.
In Q1, ISG signed our largest part of Asia deal ever.
Engagement worth more than $10 million.
Top five entertainment company provide.
Or by automation integration implementation production support services.
And we recently were awarded a $1 billion of automation development engagement with a major health care company.
This latest engagement added to our ongoing data and analytics.
Work and software advisory consulting work with this client.
ISG also has been competitively awarded a 100 dollar engagement to advisor Canadian financial institution.
On technology solutions.
Before a very specialized scope of services.
These include cash in transit ATM forecasting.
Origin storage security and foreign exchange currency be uneven.
This reflects the broad array of services, we can offer our clients to help support their technology Road maps.
ISG has also been on boarded a two year, one 5 million dollar cloud transformation engagement.
A leading global provider of advanced analytics and clinical research services.
On the life Sciences industry.
ISG will support a two year initiative on migrating our clients on Microsoft Cloud platform.
One of the larger smart hosting cloud migrations.
Healthcare and life Sciences industry.
More than 50000 servers.
In 'twenty kind of bytes of storage.
And all of this was accomplished and remote selling and delivery and bar.
Now turning to Europe, our Q1 revenues of $23 million were up 4% versus the prior year.
Locked down in most of Europe impacted the year over year comparisons.
During the quarter EMEA delivered double digit revenue growth in our research govern apps and network businesses.
On our industry segments, our insurance and media vertical grew by double digits versus the prior year.
Key client engagements in Europe on the first quarter.
Included all yours.
Mr Shaw.
Hopes wagon.
He came he informatic Angelo manure bank.
We continue to expand our relationships with existing clients.
For example, we introduced ISG govern access at a major global Life Sciences company.
Under a new multimillion dollar three year engagement with this longstanding ISG clients.
On another client on major European auto manufacturer.
ISG has been awarded a three year 4 million dollar contract to support the business platform.
On the mutual services arm.
The client's digital platform will offer all relevant products and services online in 2020 one.
<unk> group customer sign on services digital workplace and collaboration services.
Finally revenue in Asia Pacific were up 24% versus the prior year driven by growth of the bank insurance energy and health science industry vertical.
Key clients from the quarter include wireless services.
E G.
Suncorp.
Toria Felipe.
A&P services and standard chartered bank.
Now, let me turn to guidance.
Even with the prudent situation in the U S. The pandemic continues.
The effect on our clients is most pronounced a moment Europe due to continued lockdown.
There also is continued uncertainty with it certain industry segments on.
Travel and hospitality.
In leisure areas like casinos, Inc. Cruise lines on.
Although we are beginning to see early signs of renewal in these sectors.
Despite this we see the demand environment for all things digital strengthening overall in the first half of 2021 versus a year ago.
And this is the ISG sweet spot.
As clients become more bullish about their post pandemic recovery.
There is growing appetite to re accelerate digital transformation.
We see that acceleration, starting slowly, especially in Europe and picking up steam throughout the course of the year.
Digital transformation is still the top priority for most every client we work with.
COVID-19 has shown every company the power of digital.
Connect people attract new customers.
And enable a new era of business efficiency growth.
And with that comes growing interest in cloud adoption.
We're agile business models.
Network modernization and workplace of the future technologies.
Everything that's needed to better engage with customers.
Develop new business opportunities.
And improved collaboration and efficiency within an organization.
For the second quarter, we see an overall strengthening in the demand environment for ISG services.
Particularly versus the second quarter last year.
We remain somewhat cautious given that the pandemic is still impacting parts of the world to varying degrees.
Moving to current Lockdowns in Germany, and France.
The situation in India is tragic.
Thanks to work from home measures already in place, we do not see a major impact on ongoing client delivery.
As service providers.
With more vaccines.
On the horizon and economies begin to open up we are positive in our outlook.
We are forecasting double digit growth over the over last year with Q2 revenues.
Between $65 million to $67 million.
And adjusted EBITDA between eight and $9 million.
This compares to revenue of $57 million in the prior year.
Our forecast a student accounts several pandemic related factors.
In Q2, we are planning no revenues from in person ISG produced destination events.
And we are planning near zero on client TD reimbursement revenue.
We also expect revenue in a few industry segments, Inc.
Travel.
Balance with double digit growth in digital services.
Now turning to our dividend.
Last night, we announced that our board of directors has approved the initiation of a quarterly cash dividend to common shareholders.
ISG will pay a cash dividend of <unk> <unk> per share of common stock on June 18.
Shareholders of record on the close of business June Corp.
Core expects from third quarter dividend, which is scheduled to be announced on August nine will also be set at <unk> <unk> per share.
This rate debt equal 12 cents per share over four quarters.
The board's decision to initiate a quarterly dividend as we enter our 15th year as a public company.
Demonstrates our long held commitment to reward our long term shareholders through a robust capital return program.
Our ability to return significant capital over time.
Made possible by the consistent delivery of our operating and financial plans.
Describe sustainable profitable revenue growth and strong free cash flow generation.
ISG is durable and cash generative business model.
Generated a record $44 million on cash flow from operations in 2020.
On a record $12 million on the first quarter of 2021.
It's allowed us to reinvest in our business.
In addition, we have prudently managed our debt levels on.
Our debt balance by 38% since December of 16.
As we move into 2021, the initiation of a dividend is a logical progression and adds another element of our capital allocation strategy.
We believe that dividend will provide predictable ongoing returns.
Underscores our commitment to deliver long term value to our shareholders, while continuing to allow for share repurchases debt repayment and bolt on acquisitions.
As you know, we recently announced that David Berger is retiring in June from.
On his role as executive Vice President and Chief Financial Officer of the firm after nearly 12 years with ISG.
Nathan will remain with ISG for a period of months.
Moving on some ongoing M&A projects.
In assisting our new CFO, Bert Alfonso and his transition into ISG.
Hartwell oversee all areas of finance legal affairs and M&A for ISG.
It will serve as your principal Investor relations contact.
I'd like to personally thank David.
On your contributions to our arm his leadership and importantly, your friendship.
So with that let me turn the call over to David who will summarize our financial results David.
Thanks, Mike.
I sincerely appreciate your kind words, I too will miss working with you and the entire ISG.
And a tremendous right.
10 acquisitions completed during my tenure and.
And with more still on the pipeline.
Looking at the quarter.
Managed through a difficult operating environment to deliver record results in Q1.
Revenues for the first quarter were $66 $6 million up 4% on a reported basis and up 1% in constant currency.
Compared with the first quarter last year.
Currency positively impacted reported revenues by $2 $4 million versus the prior year.
Putting the floating reimbursable client travel costs of $1 $5 million.
Which accounted for approximately 240 basis point decline versus the prior year.
Revenues were up 7% versus last year.
What did revenues excluding T D.
$38 $1 million in the Americas up 7% versus the prior year.
<unk> $2.7 million in Europe up 4% versus the prior year.
$5.7 million on Asia Pacific up 24% versus the prior year.
Record first quarter 2021 adjusted EBITDA was $8.6 million up to four times on.
On last year's first quarter.
We reported record first quarter operating income of $5 million.
With an operating loss of $700000 in the first quarter from 2020.
Net income from the quarter was three four.
$4 billion and.
Fully diluted income per share was seven cents per share.
Yeah, with a net loss of $1 4 million and a fully diluted.
The loss per share up three cents, respectively and the price.
A year.
First quarter, adjusted net income up $5.5 million or 10 cents per share on a fully diluted basis.
Adjusted net income of $1.1 million <unk> per share on a fully diluted basis.
Prior year's first quarter.
Utilization for the first quarter was 75% versus 68% in the prior year.
Any impact on new ISG net.
Operating model.
Our balance sheet continues to have the strength and flexibility to support our business over the long term.
Net cash provided by operations reached a first quarter record up $12.1 million okay.
With $4 6 million on the player.
We ended the quarter with $48 $6 million of cash up $2 eight chart from.
$17 4 million in the prior year.
We repaid $1 $1 million of debt in the quarter lowering our debt balance to $77 7 million and on net debt to EBITDA ratio 0.9 times.
And we repurchased $3 million in ISG shares.
Our average borrowing rate for the quarter was 2.5% almost half of last year's rate and we had 48 million shares outstanding as of April 30.
Before I hand, it back to Mike, Let me say, it's been a pleasure working with all of you our investors.
Half of the firm I appreciate your loyalty and trust in ISG is a valuable long term debt.
So with that let me turn it back to Mike who will now share concluding remarks before we go to Q&A.
<unk>.
Thank you David.
To summarize we had a record setting start to the year.
Revenue up 7% and EBITDA up to four times.
Revenue EBITDA and EPS, all beating expectations.
Our balance sheet has never been stronger.
The $8 $6 million of cash and net debt down to 0.9 times EBITDA.
Our new operating model I asked you next.
Riding a more profitable enterprise with our Q1 margins of 13% up from 6% the prior year.
You see digital demand, increasing as clients look to accelerate their digital transformations coming out of the pandemic.
<unk> momentum is also accelerated.
Our Q2 guidance is up significantly over the prior year.
And we announced the initiation of a quarterly dividend to reward our shareholders.
As always we are focused on creating shareholder value for the long term and we are steadfast on our mission to deliver operational excellence to our clients.
Well, thank you very much for calling in this morning.
Now, let me turn the session over to the operator for your questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned on to allow your signal to reach our equipment again press star one cash.
Ask a question on pause for just a moment to allow everyone an opportunity to signal for questions.
We'll take our first question from Joe Gomes with noble capital.
Good morning, and congrats on the quarter Fantastic Green, Joe Good morning, Joe. Thank you.
So just wanted to a couple of quick questions broader for you Michael.
How is the state business unfolding here, especially as we see the headlines at least at the federal government pumping significant amounts of money into the state Inc.
To the states and do you see any positive impact on the business from Europe.
So good question first of all our public sector business.
In the U S continues to be strong and steady at that you know these are longer term.
Contracts that we have with the state and local governments.
Yes, we have our eye on all of that money beginning to flow into the different states.
There are some restrictions on how they use it but no restrictions that were debt, where we are aware off around their transformation.
They could do with a lot of your old antiquated technology. So we are keeping an eye on it keep in mind. These things have a long.
Runways and Tom's about it because they go through a whole process of Rfps and so on.
It would be a net positive crossover cases on.
Okay, Great and then.
I was wondering if you give us a little more color on the.
Significant I S. T automation when you know how that all came about and <unk>.
Who you're competing against for this and do you see more these significantly larger than normal.
Deal potential deals out there.
Oh good question, Joe So first of all along with specific.
This is a very large top five global Entertainment company.
They went through a significant cash merger during COVID-19.
And as a result of that they have things like reward cards et cetera that they're looking to fully integrate.
And they would like to use automation to help them on their journey.
So yes, we did compete with that I think are independent third party.
<unk> Act.
Agnostic approach.
But the winner in addition to the talent and to the large scale.
But we have done in ISG over the years in around the 10 discrete secured this win this is a win that's greater than $10 million.
It could get even larger and that will flow through from.
During the second half of 'twenty, one and fully in 'twenty. Two so you can see this over the next 18 months or so that's number one number two.
We are beginning to see that clients are beginning to accelerate moving from kind of center of X months.
Much try a process or too many industry segments now with the pandemic are looking to accelerate.
They're automation journey and to move to a much more scaling up that and I think we will see that over the next couple of years.
As you May know you know you I path.
<unk>.
Went public.
300, and $600 million in revenue on a 50 times revenue.
Paul.
So the industry itself is picking up some steam.
Our automation business.
Is it.
Also contributing to that and we are also seeing the benefit of <unk>.
Lions are scaling their automation, so yes, Joe we do see that increasing over the next 18 months or so.
Great. Thanks for that one last one from me and I'll jump back in queue.
Obviously, you know last year for most of the year on as you mentioned, even here in the first quarter the live events.
Have have taken a hit due to the COVID-19 restrictions and he kind of timeframe is when you you see the live event starting to come back and contribute again to the top line.
Oh good question.
Moment.
We are planning in our financials for the year on.
They have very level. However, what we are doing internally is we are anticipating potentially in the United States.
Launching our first physical event of any size in September so right at the end of Q3, so depending on how the world.
<unk> here.
Sponsor over the next couple of quarters or sorry, a couple of months, but vaccinations.
Penetration that's here the interest level from clients. So it's possible we will begin to see that at the very tail end of Q3.
So that's what we're that's what we're internally planning on them on.
Okay, great. Thanks for that Michael David. Thank you for all your help and the in the past and have a great retirement.
I appreciate that.
We'll take our next question from Marco Rodriguez with Stonegate.
Good morning, guys. Thank you for taking my questions.
Marco.
Hey, Michael I was wondering if you could maybe spend a little bit more time on.
On some of your prepared remarks, where you talked about this new wave of digital transformation.
I'm assuming.
There are people out there that you are still needing to convince as far as all things digital is concerned.
Or are your comments more around just people starting to get comfortable or inc. Customers getting comfortable with the economy and their sort of loosening the purse strings, if you will.
So I would I would put it.
What about cloud from a minute.
Clearly people are.
We're close to the cloud for the last several years however.
The level of speed the acceleration is all picking up as a result of the pandemic why because of the way work was performed with changed dramatically during 2020.
But when we think about you know all things digital and you talked about cloud in particular, we're talking about moving on to accelerated piece of the workloads to the cloud. So everything from our work is everything from kind of cloud implementation strategy to cloud readiness inside of our firm.
Helping them develop a application portfolio.
Migrate.
Our strategy around migrating some of those applications.
It's around kind of sourcing for cloud transformation.
Designing cloud governance billing chargeback.
There's a number of areas now that there is appears to be an increased level of investments emerging from the pandemic that's going to accelerate these digital transformations.
For most companies.
Most industries were on you use a football analogy. We're just beginning to March on their own 30 yard line. They are now wanting to move on a faster pace that is kind of our sweet spot. So that's what we mean by the acceleration on the digital journeys for investments by clients and acceleration and expansion.
What they may have started out on a pre COVID-19 environment is now pushing the accelerator down much more that's what we that's what we're seeing.
Understood very helpful.
And then in terms of your competitive positioning you sort of address this.
In a prior answer here for the question.
I'm, assuming that most people, obviously, you're seeing the digital transformations the adoption curves steepening.
Obviously I have a really good position in terms of your independence day and your research aspects.
But how are you kind of seeing yourself positioned it and if youre seeing any sort of.
Companion responses, just given your positioning for for the digital transformation for your clients.
So our competitive sets Marco.
Essentially have not changed.
It varies a bit but we see the.
The big four accounting firm.
Out there.
Around that we see some of the service providers, especially on the automation side out in the marketplace and they're doing it for a different reason, they're doing it because they have a massive number of people that were doing work still on an FTE model and as these contracts are beginning to terminate these model.
Those are all changing to outcome. So it is in their best interest to automate as fast as they can automate their business.
So theyre looking for that from that standpoint, but it's not independent it's not third party.
On the cap Gemini or on an accenture on one of these others I'm looking to retain the work that I have on enterprise apps and one way on we'll do that if I well how automate on reason I'm wanting to automate yes, because I have all these people and I am not going to need in a more automated environment. So that's the landscape on <unk>.
Competition, frankly has not changed much.
It's the same set.
Our competitors for US we just think we have a nice.
Cash by being independent third.
Third party by having these relationships with 700 Blue chip clients, where we can go in and say Hey look we can be your independent objective third party.
Trusted advisor on all things digital that's our market position.
Understood and last question from me, just kind of around capital allocation with the new dividend being implemented.
Maybe you could kind of update us on your thoughts on you know.
Any sort of prepayment of debt, obviously, I know that the interest rate is pretty cheap.
On kind of stack up where M&A fits into everything as well.
Yeah. Thank you.
And after the dividend doesn't preclude us from.
Continuing us to pay down debt, we have a requirement of $4 million given the.
Given.
On the current interest rate environment.
We don't really see accelerating that at this point.
But you.
Strong cash generation that we did that occurred last year in the first quarter anticipated for this year.
We see still being able to.
In addition to the dividend allow from a repurchase of shares.
The pursuit of acquisitions on an opportunistic.
Got it and I'm sorry, if I can just have one quick follow up on the M&A environment.
What sort of opportunities are you guys kind of looking at if you can kind of from a high level just discuss that and then what are the valuations sort of look like.
So on workloads, Michael I would say acquisitions, we continue to focus primarily in two areas.
Anything that is digital related that we think can accelerate or add a channel into kind of our distribution network that we have now which is at the C suite level.
We continue to look at if there was something there that we could do to either add capability will accelerate some from.
Digital channel, that's one and on the second.
All things recurring revenue that we could use it yet.
To sell into our distribution channels that we have in the C suite.
There are a few other things that may come up opportunistically buy in terms of strategically going after those are the two areas relative to valuations you know theres always from a buyer seller, there's always a bit of an inflated view from our perspective is the buyer.
That the sellers viewpoint on value is higher than what we believe it ought to be so we will continue to stay disciplined on that.
Have walked away from a few things because we have not gotten to the level of valuation that we had preferred.
But we will be disciplined and we will do the right things to add value to the overall from.
Got it understood congratulations David on your retirement I Hope you have a great time. Thank you guys for taking my questions I appreciate the time.
Thanks Marco.
We'll take our next question from Vincent <unk> with Barrington Research.
Yeah, Hello, Mike nice quarter, and very nice quarter.
So.
What is how does the sales pipeline changed from the end of the last quarter to the end of this quarter just.
The question is to get a sense of what the revenue trajectory may look like on the second half.
So the sales pipeline.
Is is.
He is building very nicely.
For 2021 2022.
These have a load on the longer close cycle on them.
But as I mentioned earlier.
Thing related digitally.
Pipeline has picked up.
A lot since saw towards the tail end of last year.
Sales cycle is a little bit longer, especially in Europe, because there is still some uncertainty about the pandemic and when it ends the U S.
There's a little bit of pent up Europe, Australia is a little bit of an out of Europe.
But that's how we see it unfolding with them within.
Within the regions.
And but the pipeline is looking out looking good as we evolve through the year.
And the automation that the larger automation deal that you won.
Over what time frame will that'd be delivered.
That'll be delivered over 'twenty, 'twenty, one and into 'twenty two.
Okay.
Clear.
Clearly the digital environment is.
Is it sort of a.
A tailwind for you for your business.
I mean, if we look back at 2019 to now.
I assume you think your organic growth potential of the company is higher now than it was then would you like to take a shot at sort of what kind of organic growth do you think you can do over say a three to five year time frame.
Well, our target I think remains kind of high single digits on the revenue line with EBITDA.
One on a half times revenue growth.
Overall over a long period of time goes on the white markers for us.
That doesn't mean, we won't know.
Years, when we can hit the double digit top line growth.
But that's our that's how our overall markers that we have.
We remain.
Steadfast in those markers.
Okay.
Any thoughts on you know government activity and in APAC.
I didn't hear you talk about debt this quarter should that come back later on there.
Yeah. So on the government business is nice and steady now.
In Australia.
We've talked before that the Australian business government side.
Spending on it serves us well for the whole region I mean.
And it continues to be it.
It continues to be steady for us it is growing.
But in addition to that the commercial enterprises and Australia.
Also all picked up steam relative to digital and that's why you saw.
Pretty good growth.
On a quarter here in Asia Pacific So I think the government business looks strong for this year in Australia.
It should serve as well from the region for the year.
And congrats to David we'll Miss you Buddy.
Thank you Vince to welcome appreciates it.
Thanks, Matt.
And again to ask a question. Please press star one.
We'll take our next question from Marc Riddick with Sidoti.
Hey, good morning, gentlemen.
Morning, Mark.
So first of all David I wanted to congratulate you on thank you for everything along the way and hopefully I'll look forward to once you are done because you're not completely done yet, but look forward to a very happy retirement. There. So thank you for all of your efforts.
I appreciate that one.
I wanted to touch a little bit on.
That's around the utilization and I think so you're you're looking now at mid seventies.
Well I was wonder if you could touch a little bit on maybe.
What you've seen there in the past as far as what the maximum level that you've seen in the past him on what you think might be attainable now give them a new the new business.
Structure and kind of what youre seeing there.
Oh, yeah, thanks for that.
We were able to leverage our experts globally.
Now with <unk>.
Travel near zero debt.
It has also had the impact of increasing on a pro.
On activity.
75%.
You know a good level.
We're striving to continue to maintain that.
You see how that group.
Our results with our margins.
Where they are at 13% versus 6% last year.
Great and then I was wondering if you could talk a little bit about your initial I know it's it's it's you know it's relatively early but I wonder if you could talk about some of the initial findings that you're seeing so far with what's next and talk maybe a little bit about are there any surprises. So far is it along the way of what you thought it would be.
A little bit about that and the evolution there that you see going forward.
Well Mark it's Mike Yeah. The ISG next I think has performed exceedingly well on.
And I would say a bit better than even our expectations.
Early on here in the model is basically based on a couple of principles.
One is is that if we can take our experts that we have around the world and we can leverage them with any client anywhere any time.
And we should be able to generate more revenue because we have stronger experts in front of a client in front of it at this pace on a remote way.
And then second of all the Isolex delivery network that we've created which enables us to kind of flex the resources, because they're not jumping on an airplane on Monday morning on.
On the hormone personally night, clearly makes them more profitable and it makes them available on multiple clients. During the dead time. So this is what's also helping to get to that 75% utilization.
The point that David mentioned that is a pretty significant utilization level when you factor in holidays.
And time off and you add in its training time all around the world.
You know, whether we can stay at that level every quarter I mean, I was going to be somewhat dependent on how clients engage us in we come off a field. So on so there's a little bit of a factor client influence influence on that standpoint on in terms of next overall, we are very pleased because we could take things.
Right.
For security, where we provide services around.
Risk assessments assessments.
Security enable them on it.
Security strategy, and we can take our cyber experts in Europe on our cyber experts in the United States and we can leverage that poll jago.
And our new model that we were not able to do if we were all used to be on site with our clients.
This isn't gonna be forever, our sense is that we have a nice runway.
This year and into next year, and then we'll have to see how clients behave.
We expect some of our clients to one on people or at least some of our people back on premises in 2022.
But we will not be going back to the way it was pre COVID-19 for some period of time yet Michael.
So those are some of the areas that we're seeing ISG next on our I flex delivery.
Network operate and it's resonating very well with our clients as you can see with the increased number of clients, 11% up on a quarter.
And some new clients that we also had it still very much working in a remote environment and that's helping our productivity work.
Okay, Great and then if I could add just another I wanted to touch a little bit on maybe how you've seen the business return.
With the the activity on the acceleration really appreciate the commentary that you've given and I was wondering if you could talk a little bit about maybe the way. It has come back is there does that give you any more or less visibility than you've historically had with a potential upcoming.
Engagements or maybe what debt or is it similar to what you've seen in the past on when you could touch a little bit on that even if it's sort of been an anecdotal fashion.
What we're seeing I think on the visibility.
Don't think it's cheap that much just because of the day.
Nature of what we do.
Mark So I would say visibility is somewhat similar.
We've always had it clearly is recurring revenue has increased now being a third of the business that helps.
But in terms of are more project based business I would say that visibility is somewhat similar from that standpoint.
But we are seeing flow is an acceleration and therefore, our pipeline is increasing.
We talk about a bit earlier that we are seeing some increase in investments.
And digital transformation across the board in multiple industries.
Even some of the industries have been hit the hardest hotels cruise lines are beginning to engage us from the second half of the year coming up on work that they want to do because they know they asked to do on the revenue begins to come back.
We're in a stronger position than to put some money into these digital transformations that they know they need to do as well.
Automation deal that we talked about that's a major entertainment company that was hit very hard by COVID-19, but they see this as a an acquisition on a merger that they completed they've gotta get it together they want to take out a lot of cost. They believe automation can help them and they can have a better customer experience with an integrated reward.
On a program rewards card program et cetera, So that's how I would probably say we view it.
Yes, it's very encouraging to hear that debt level of engagement from from those types of customers. So thank you very much.
Okay Mark Thanks, Thank you.
That concludes today's question and answer session. At this time I will turn the conference back to today's speakers for any additional or closing remarks.
Well, Thank you and let me let me close by saying, Thank you to all of our professionals worldwide.
Stepping up challenges presented by the coronavirus and delivering these terrific first quarter results.
Even working remotely theres been no let up in our passion.
Delivering the best advice and support to our clients.
And allow me again.
In my Sincerest GAAP.
Best wishes to David on his retirement and the burnt on assuming his new role with ISG.
We're going to Miss David's contributions and I'm going to Miss his friendship.
We also look forward deferred taking over without missing a beat.
And finally, thanks to all of you on the call for your continued support and confidence in our firm stay well everybody have a great day.
This concludes today's call. Thank you for your participation you may now disconnect.
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