Q1 2022 Information Services Group Inc Earnings Call
Please standby we're about to begin.
Good day and welcome to the information services group first quarter 2022 results conference call.
Today's conference is being recorded and a replay will be available on the Isg's website within 24 hours.
At this time for opening remarks, and introductions I would like to turn the comments over to Mr. Barry Holt. Please go ahead.
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 first quarter conference call I'm joined today by Michael Connors, Chairman and Chief Executive Officer, and Bert Alfonso Executive Vice President and Chief Financial Officer.
Before we begin I'd like.
To read our forward looking statements. 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 statement contained in our form 8-K that 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 won't be able to obtain free copies of any of Isg's SEC filings on either Isg's website at www Dot ISG dash, one dot com or the SEC's website at www.
Dot FCC dot Gov.
I guess, she 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.
The non-GAAP measures, which we will touch upon 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 for financial results prepared in accordance with.
GAAP and the.
A 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 Bert Alfonso.
Mike.
Thank you Barry and good morning, everyone.
Today, We will review our record financial results, our continuing business momentum.
Our decision to raise our dividend by 33% and our outlook for the second quarter.
ISG had an outstanding first quarter.
D to our best start to a year ever.
We generated record revenues of $73 million an.
An all time quarterly high.
And we delivered record profitability.
With adjusted EBITDA of $11 million up 23% from the prior year with an EBITDA margin of 15% up more than 165 basis points.
We continue to expand our recurring revenues, reaching a record $26 million up 13% over last year, driven by our subscription govern acts and research businesses.
And on our way to our year end goal of $100 million.
We saw good growth in our Americas, Europe , and Asia Pacific regions.
And with a focus on delivering end to end solutions via our ISG I flex global delivery model.
Our utilization for the first quarter was 79% up 320 basis points compared with the first quarter last year.
This is the highest utilization in our history.
Our clients are investing aggressively in technology and are depending more than ever on our expertise.
Our long term strategic initiatives.
Positioned us well to increase our footprint with a wide range of global enterprises.
We continued to strengthen our governor X vendor compliance and risk management solutions.
During the quarter, we acquired agreement and AI powered contracting platform that brings important new capabilities to govern ex.
Capabilities, we plan to also use to enhance other platform solutions now in development.
From a client perspective, we served 500 clients in the first quarter, including 59 brand new to ISG.
Coming off a record 2021, we've extended our momentum into 2022 and the outlook for our business is strong.
We see continuing demand for our data insights advice and tools as.
As enterprises continue to invest in technology and services.
To enable greater efficiency and faster growth.
Technology is crucial to improving customer and employee experiences.
And making organizations more agile and adaptable to dynamic market conditions.
Coming through the worst of the pandemic.
Companies are increasing their reliance on the cloud and other digital solutions to power their businesses.
There is growing demand for specialized services like cyber security data analytics application development and technology modernization.
The number of choices is staggering.
Making your internal technology and external eco systems work together is no easy feat.
More and more companies are looking for a trusted partner like ISG to <unk>.
Bring clarity to complexity.
Support continuous transformation.
And help get the most out of technology investments.
It is against this backdrop that our board has authorized a 33% increase in our quarterly dividend part.
Part of our ongoing efforts to enhance shareholder value.
The new quarterly rate <unk> per share is payable June 17 to shareholders of record as of June three.
The increase in our dividend is made possible by the strong cash generating power of our business and.
And disciplined operating approach.
It is part of our overall capital allocation strategy, which also which also include share buybacks debt reduction and acquisitions.
Turning to our regions the Americas delivered $41 million of revenue in the quarter up 9% versus the prior year.
During the quarter, we saw double digit growth in our media and health Sciences industry verticals.
And among our services research govern access network and software advisory were all up double digits.
Key client engagements during the first quarter included Mckesson.
A Verizon Mcdonald's and CMO.
During the quarter, we landed a number of notable wins in the healthcare sector.
Among them is a nearly $2 million extension of work for a long standing client supporting the ongoing modernization of their infrastructure security and applications, while consolidating their supplier ecosystem.
We are also working with a major contract research organization.
Through automat to automate critical business processes.
Including clinical trial data data reconciliation regulatory requirements auditing and reporting.
This engagement is worth nearly $1 million.
ISG also is providing digital engineering services to a major telecommunications company.
This $1 million engagement is helping the client leveraged five G AI cloud and edge computing as it seeks to position itself as a hyper scaler for the connected world.
Turning to Europe , our Q1 revenues of $24 million were up 3% versus the prior year.
Up 10% in constant currency.
That's the best operating growth for this region since the first quarter of 2019.
For the quarter Europe delivered double digit revenue growth in our consulting automation and governance businesses.
And in our public sector media and banking industry verticals.
Key client engagements in Europe in the first quarter included Volkswagen.
Leon.
BNP pair of <unk> and the UK Ministry of defense.
During the first quarter ISG was awarded a $1 6 million engagement.
With a major automotive manufacturer to provide technology management support.
Essential to the company's ambitions to transform itself into a services oriented organization.
In the financial sector, we continued to expand our relationship with our long standing insurance client <unk>.
Including new work worked more than one $5 million for cloud transformation and cyber security.
We are also helping a major bank assess its sourcing contracts to close gaps and outdated agreements and bring them up to current marketing market pricing and service levels.
Now turning to Asia Pacific This region had a record setting Q1 performance with revenues of seven 7 million up 34% versus the prior year.
Driven by growth in our insurance media public sector and health Sciences industry verticals.
Key clients in the quarter included the Australian Taxation Office Insurance, Australia Group, Rio Tinto and the Australian Department of home Affairs.
Among our major engagements, we are supporting a technology company in Asia with digital engineering services to develop a connected mall as a service platform.
This $1 million of engagement is creating new digital capabilities that will open doors to other retail digitization work for ISG.
It is the latest in a series of wins for ISG in the digital engineering space, which is now a multimillion dollar business and growing.
Now, let me turn to guidance.
Our clients continue to face a number of challenges, including inflation supply chain disruptions higher energy cost geopolitical concerns and talent shortages.
And yet they remain focused on continuous digital transformation of their businesses.
Of course, we continue to monitor the situation in Ukraine, which has become a major hub for technology services.
Although ISG has no employees in Ukraine, some of our clients have used the region for software development and other services.
Thus far we are seeing little overall effect on the global technology and business services industry apart from work shifting to other geographies.
Globally, the bigger concern is the industry's ability to meet overall demand in the face of talent shortages.
ISG is working with clients on this issue now.
So balancing digital demand with these macroeconomic factors for the second quarter, we are targeting revenues of between 73 and $75 million.
Including a negative FX impact of approximately 300 basis points.
And adjusted EBITDA between 10 and $11 million.
So with that let me turn the call over to Bert who will summarize our financial results.
Sure.
Good morning, and thank you Mike.
Looking at the first quarter, we delivered a record start to 2022 as our momentum continued to drive strong topline performance and profit growth.
Revenues for the first quarter were a record $72 6 million up 9% on a reported basis and up 12% on a constant currency basis compared with the first quarter last year.
Currency negatively impacted reported revenues by $1 $9 million versus the prior year.
In the Americas reported revenues were a record $41 4 million up 9% versus the prior year.
In Europe revenues were $23 5 million up 3% and up 10% on a constant currency basis.
And in Asia Pacific reported revenues reached a record $7 7 million up an outstanding 34%.
First quarter 2022, adjusted EBITDA was a record $10 6 million up 23% from last year's <unk>.
Resulting in an EBITDA margin of 15% up over 165 basis points as compared with the prior year's first quarter.
First quarter operating income increased 54% to $7 7 million compared with $5 million in the prior year.
Net income was very strong for the quarter at $4 9 million or <unk> 10 per fully diluted share compared with net income of $3 4 million or <unk> <unk> per fully diluted share in the prior year.
First quarter adjusted net income was $6 4 million or <unk> 12 per share on a fully diluted basis compared with adjusted net income of $5 $75 5 million or <unk> 10 per share in the prior year's first quarter.
Consulting utilization for the first quarter was a record 79% up 320 basis points versus the prior year, reflecting the impact of our ISG net operating model.
And head count as of March 31, 2022 was <unk> hundred three.
Our balance sheet continues to have the strength and flexibility to support our business over the long term.
For the quarter net cash provided by operations was $4 $1 million and we ended the quarter with $43 7 million of cash down from $47 5 million at December 31, 2021.
During the first quarter, ISG repurchased $5 $5 million of shares and paid out $1 1 million of debt lowering our debt balance to $73 4 million and our net debt to EBITDA ratio to 0.7 times.
Our average borrowing rate for the quarter was 2.01% down 19% from last year's rate and.
And we ended the quarter with $48 2 million shares outstanding.
I will now turn the call over to Mike for some concluding remarks before we go to the Q&A over to you Mike.
Thank you Bert to summarize ISG is off to its best start ever continuing our momentum after a record 2021.
We delivered all time high quarterly revenues of $73 million.
And record Q1, EBITDA of $11 million with an EBITDA margin of 15%.
Our recurring revenues set a new quarterly record powered by demand for our subscription research and governance services.
And our balance sheet remains strong 44 million of cash and a net debt to EBITDA ratio down to below one times EBITDA.
We are increasing our dividend by 33%, reflecting our business momentum and.
And we see that momentum continuing as client spend on digital transformation for both cost savings and future growth.
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.
Thank you very much for calling in this morning, and now let me turn the session over to our operator for your questions.
Of course, thank you and maybe you would like to ask a question. Please press star one on your telephone keypad.
Yeah on Speakerphone. Please pick you bring hamzah and makes your mute function is turned up so that you should know reaches our Clinton.
Again, it is star one if you'd like to ask a question and we will go ahead and take our first question Joe Gomes with noble capital markets. Please go ahead.
Good morning, guys. This is <unk> filling in for Joe <unk>.
Hey, good morning, good morning.
I just wanted to start off with just the update on your guys. Just ISG automation I know you guys kind of briefly touched on that with Europe , but that.
I was wondering just overall.
For me you guys expectations, just any update on that would be great.
Okay, great well first of all our automation business continues to do well, especially in this environment. The overall market demand is up for automation to help speed cloud adoption develop apps.
Streamline business processes as clients are continuing to accelerate into digital transformation. So the automation business.
Is solid.
Great.
And I know that you guys, obviously had that agreement acquisition in March.
<unk>.
And what I was just wondering further like maybe are there future. M&A is do you guys think about maybe more tuck in deals are you. What are you guys looking for maybe some larger ones going forward.
So on the acquisition front, we have what we we look at it in kind of in parallel.
Parallel paths. The first is what we call our string of pearls approach.
Which is two to bolt on.
Assets that will help drive our digital business or our recurring revenues or fill some capability gaps.
And agreement is an example of that trace point a few years ago. An example of that around enterprise change and.
And so we will continue to look for those in the market and are always very active there.
As a result, we had agreement deal done.
During the during the quarter, our second kind of parallels always opportunistic and that is if there is a larger transaction that would make a transformative change to the business.
And that would be accretive for all of our shareowners and that of course would be something we would look at as well, but thats more opportunistic our focus is really around our string of pearls strategy around digital around recurring revenue streams and filling in capability gaps.
Sure great. Thank you.
I guess just last question for me is.
And saw that adjusted EBITDA was up 23% year over year.
And obviously the margin was good as well.
15%.
Okay, and then can you tell me where that kind of drive is for that and maybe just better cost reductions obviously higher revenue.
Yes, I would say, obviously, the higher revenue, but really driven by operating income gains.
You saw that operating income was it was a bit over 10% as a percentage of revenues, which was up almost 300 basis points versus last year's first quarter clearly our ISG next and I flex model continued to contribute to that.
And.
The outstanding utilization rate.
That we were able to deliver in the first quarter, 79%.
While we don't know that <unk> sustainable we've been very steady in the mid seventies versa.
<unk>, maybe 10 basis 10.
Basis points Lower Creek Pandemics and so it was very much operating income driven.
Yeah got it great. Thank you so much for that I will get back in the queue great quarter guys. Thank you yes. Thank you.
And we will go ahead and move on to our next question go ahead Vince.
Vincent Colicchio with Barrington Research. Please go ahead.
Yes.
Morning, Mike Nice quarter.
Good morning.
Yeah.
Curious if you've talked about strong business momentum I'm, just curious if youre seeing any signs sort of canaries in the coal mine.
In terms of economic weakness in any of your geographies or verticals.
No I mean, clearly with inflation and with supply chain Ukraine noise.
We continue to watch this in different industry segments.
But the digital transformation.
Initiatives are winning out I would say at the moment.
And keep in mind, we always look at this we have kind of two levers in our service offerings for clients. One is to help them grow so help them with their digital transformation with their business transformation and the second is we're experts in cost takeout.
So if for any reason the particular business in an industry segment.
Might have a more difficult time than another then we have our rapid cost takeout.
Services available and we do utilize them from time to time of course so.
So we have both of those available depending on what the situation is with a particular client, but geographically all three regions.
Look quite strong at the moment I think I mentioned, the European market was up 10% on operating basis in the quarter Thats, our best since 2019.
And I think we indicated last year that if the Europeans began to come out of there.
Pandemic.
I'm kind of holding pattern, then we would see.
A good year in Europe , and we're seeing that now so.
I'd say globally around the world right now Vince still looks good and I would say the digital transformation.
Is greater than all of the macro economic issues at the moment.
A follow up on the utilization.
Question, I mean, 79% a year.
Huge change.
<unk> changed for you guys.
I think you just said you're not sure you can maintain that high of a level but.
What would be more of a kind of normal level before you going forward what are your thoughts on that.
So we are we are kind of target sustainable target is if we could be in that 75% range give or take.
That really generates profit for the firm.
And so that is kind of our internal on that as Bert mentioned is about 1000 basis points.
Higher than approximately a year ago, when we were primarily in the mid sixties.
So our new operating model has been quite effective.
And we believe we can sustain that kind of level of productivity in that mid 70 range Vince.
Okay. My last question here is.
Digital engineering.
You talked about that for quite some time being a big market opportunity it sounds like you're hitting your stride.
Just curious.
Are you able to hire all the people.
Need to satisfy the demand there or does that look like.
Yes, so right now we're in good shape.
We have a terrific head of HR.
That has a great kind of recruiting machine, if you will for us and we've been very successful over the years, but yes, we have been able to attract the talent based on our business model and the flexibility that we provide for employees and so we are well staffed and the digital engineering area. As an example of that is this <unk>.
When we went over in Asia.
Where we're basically helping digitize in India, a number of malls.
<unk>.
With retail Digitization, if you will it's a very large project. We hope this is step one of many.
And we were able to staff that up.
With with.
With great I won't call it ease but with.
With great efficiency I will call it and we're in good shape at that point at this point.
Thank you I'll go back in the queue.
Yes, Thank you Sir.
And we'll go ahead and move on to our next question from Marc Franklin.
Please go ahead.
Hey, good morning, gentlemen.
Good morning, Mark Good morning, Mark.
So I wanted to continue on that thread because the.
Digital rotation.
Retail mall kind of idea can you just talk a little bit about that opportunity developed and if that's a relatively new type of opportunity and then maybe you can sort of expand as to are you beginning to see different types of.
Hum.
Our marketplaces to pursue.
Yes.
I'll leave it there thanks.
So yes, so first of all it is a brand new opportunity for US we were recommended.
By one of our large enterprise clients to this client who we had never worked with before they loved what we were doing we sat with them and laid out a strategy on how to execute what their vision was which is essentially the digitization of malls.
Starting in India, and they have plenty of room to maneuver in India as you can imagine.
The first set as a set of 10 malls.
Where we're helping them digitize kind of the mall environment.
And bringing it into kind of the world of 2022 'twenty three if you will.
So yes, we think that is a great opportunity for us we could envision a lot more what we would call retail digitization.
And our whole digital engineering move is really.
Around trying to kind of help clients and a secured kind of intelligent and connected economy, we would like to refer to it as and so that is what our digital engineering thrust is we brought in a expert partner from the outside last year to help drive this business and he and the team are.
Doing a terrific job getting this all launched for us.
Yes, that's really interesting to hear about thanks for providing that and then I wanted to sort of maybe do.
<unk> approach to the commentary around the utilization because others have already mentioned.
Pretty strong Sterling level I was wondering if it's.
When laying out ISG next originally where did you sort of have a general target is to or how high you thought utilization could get you I know you talked about mid seventy's that sort of a general area that you would normally operate in but.
Yes.
Is there sort of a high point, where you sort of think or maybe it could lead to an acceleration of hiring how should we think about maybe what the plateau could be there.
Well when we laid this out which was in the heart of the pandemic and the.
Summer of 2020.
Frankly, our goal was kind of low 70, 70 72, we thought if we could get kind of from the mid Sixty's and get it with a seven in front of it that that would be a real cash generating benefit for the firm and for our shareowners.
Clearly as you have seen over the last now almost year and a half we have kind of blown past that.
And culminated with the 79%, which is which is a level that we would not necessarily see every quarter. We think if we can target that mid 70 range give or take a bit on a kind of a consistent basis. Then this is a real cash machine.
Because that means our productivity is nearly as high as you can get and remember we used 2080 hours as our denominator here, we do not subtract out vacations holidays, maybe like other firms do so this is on a really 2080 basis, which puts it even more.
Kind of.
Reflection, there so I would say mark we expected something lower that's what we planned for and clearly.
We are exceeding what we had originally thought we could do with this model.
Alright, okay.
It's certainly interesting to see.
And then I wanted to sort of circle back on as far as use of cash is certainly.
You've talked to actively about returning capital to shareholders, we've certainly been doing that.
I congratulate you guys on that.
It's sort of an early thought but.
The initiation of the dividend last year.
And then raising it this year is there sort of a long term thought that you have around the.
The use of dividends.
They're sort of a general thought assumes little being a long term sort of with dividend growth kind of company or how.
Should we think about that.
Yes, thanks for the question Mark when.
When it didn't I was initiate obviously something that's very important to us and so.
We're coming up on our first anniversary and based on our on our confidence in terms of cash flow generation for the coming for the coming year.
The board was supportive of the increase which which management recommended.
Over the long term I think we would we would like to see our dividend increasing in line with profit growth, it's not going to be a perfect match.
Like every every every year I would say, but I would say all of our long term dividend increases in line with profitability.
As a as an algorithm that we think makes sense for our shareholders.
Okay, Great and then the last question for me I was sort of curious as to maybe if you've seen any.
Differences as to overall.
Or kind of where folks are in their digital transformation journey by industry vertical are you seeing some verticals that maybe started out a little slow pickup or or vice versa.
Yes, no. It's a good good question clearly we operate in 20 different industries. So it does vary on the on the curve. If you will who is in the first second innings and who is in the fourth or fifth inning nobody's beyond that stage, but I would say that the whole area of healthcare life Sciences.
Insurance retail those areas are.
Or accelerating.
Digital transformation, I would say healthcare and life Sciences.
We're not the first to the party.
But I think have been necessitated there I think the retail.
They tend to be much more careful on their spending power.
<unk> found themselves during the pandemic in a different situation, which has allowed them now to accelerate.
Their digital journey, just think about the digitization of malls, I mean, who would've thought you would spend money necessarily on that certainly two years ago. The answer would've been no. So yes, when I see good increases in healthcare life Sciences.
Retail.
And even insurance, which is.
An industry that is quite risk averse, because that's their business their business is to manage risk.
And so doing kind of the disruption that automation and digital journeys do doesn't come easily or that industry necessarily.
And we are seeing an acceleration in that area those would be the ones I would highlight mark.
Okay, Great and then last one from me I promise.
I was wondering if that's sort of with the projects that youre seeing now.
Is there a way to sort of what your.
Visibility of revenue visibility is small compared to <unk>.
Years ago. Thanks.
So.
First of all our revenue there's two things that we look at number one we have recurring revenues and recurring revenues are call. It now a third of the business or so.
So that gives us visibility the second thing that gives us visibility is that we know that 80% of our revenue.
Will come from prior year's clients, So we call that our re occurring.
Model.
The point is we don't necessarily know, whether theyre going to spend $3 million or $2 million or whatever in a given year, but we know and in aggregate they will spend about 80% and therefore, we think about it is re occurring revenue.
We don't necessarily know, whether theyre going to complete their work and therefore us to recognize our revenue.
In a given quarter or in the next quarter.
And so we don't try to predict that and we're not a product company, we don't try to cram something down a channel at the end of the quarter, we follow our clients in terms of the pace in which they want to operate.
So I would say that our visibility is certainly better than it was during COVID-19.
But because clients will maneuver around when and the pace in which they operate.
That's how we think about visibility if you will.
Great. Thank you very much.
Okay Mark Thank you.
We'll take our next question from Marco Rodriguez with Stonegate capital markets. Please go ahead.
Hi, good morning, everybody and thank you for taking my questions.
Good morning, good morning Marco.
Good morning.
Was wondering Mike I think I heard you correctly in your prepared remarks, you are talking about talent shortages at your end customers and I believe you said that you're kind of working with those clients to kind of help them. There I was kind of curious on that are you looking to potentially add workwear replacement type services or is that just something.
On a one off type thing youre kind of helping people with we can talk about that that'd be great.
Look no. We are we are not going to be in the.
Stag staff augmentation business, but what it's enabled us is that before and I think we've said this for several years. Our number one competitor is internal to these large enterprises and.
And what happens is is that if the internal enterprises have difficulty.
<unk> rolls and doing things internally, they begin to shift to them to clients. The clients will begin to shift to those trusted partners that they believe can do that work.
And so what may have been done internally in the past now enable gives with ISG and opportunity to do work that we've wanted to do before but because clients have opted to try to do it internally themselves. So that has also been a great benefit to us and Thats, what I meant by saying we are working with clients now.
In areas that we really try to try to focus our business on whether thats, whether thats networking or networks or whether that's cost optimization, our future of work or or cyber or business ops whatever it might be.
Where they may have done some of that work inside they are now, saying you know what let's just move this work and let's have ISG help us with this strategy and with this cost optimization or with these business operations Thats, what I mean by that that is a benefit to us.
Got it understood.
Have you seen that im assuming youre seeing this opportunity here.
Basically kind of take share from the overall landscape sort of accelerate here in the last few months or is that had been something that's been building here for the last year.
No I would say kind of the beginning of the year. This has become a bit of a shift in client behavior, which is which is to our benefit.
Got it.
I appreciate it.
And then circling back around to the conversation that we're having here on the acquisition.
Can you just give us a little bit of background on the recent acquisition just I mean, how it kind of came about the timeframe. It took you to basically kind of look at that opportunity and pull the trigger if you will.
So on agreement, we had worked with agreement last year.
And we were working on two major very large enterprise clients.
And we approach.
The team at agreement.
And we.
We said look why don't we think about have you joined ISG full time.
And I would say that between roughly the January timeframe and the time, we closed it which I think was was April March 'twenty March 28th that would've been the timeline on that one.
Got it very helpful. And then if you can maybe talk a little bit about what your M&A pipeline sort of looks like right now.
How the.
Sort of landscape of opportunities for you has been shifting over the last 12 months or so.
So the pipeline is strong.
There is there are opportunities that are out there as I've said before we do a lot of our own sole source.
Work.
We have areas that we're interested in and we target and we.
We have conversations with potential target companies to see if they have.
Interest in joining the ISG franchise, if you will.
And so that is ongoing is constant it's also.
Normally it takes a while.
Cause it's both an emotional as well as a financial.
Deal and.
And thats because most everybody we work with are the owner operators of those businesses. So.
I would say that the pipeline is strong.
But we don't try to move things at a pace that the owners are not interested in moving we move at their pace and so some of them can take shorter periods and some can take longer of course.
But we feel good about our strategy, it's we've executed well over the years, we've done 10 transactions and I think we've done them exceedingly well and accretive to all of our owners.
Got it very helpful. I appreciate your time guys. Thank you. Thanks.
Thanks Maria.
And we will go ahead and take a follow up from Vincent. Please go ahead.
Okay.
Yeah, Mike or Bert.
Could you help us for modeling purposes think about the sequential direction of each region in Q2.
When you say, a sequential <unk> tomo growth or.
Sequential revenue growth, yes, yeah, well look we.
As a firm we talk about it globally not by region. So I think we've given the guidance for the quarter.
But we do expect all regions to continue their growth trajectory that you saw in the first quarter.
One thing we would add in my head.
Some of his comments was.
In the European context, as well as in Asia Pacific, We do expect that constant currency will outpace operating results will outpace U.
U S. Dollar results, we gave us sort of a range two to 300.
Basis point drag.
From FX as you all know the dollars at a particularly strong level. These days.
And then Mike could.
Could you maybe highlight the service lines that should be strongest this year and which ones may lag.
Yes, well look I think I think automation I think network I think.
Our sourcing business.
We will all be strong cyber will be strong.
Our software services will be strong and of course, our all of our recurring revenue govern acts and research we expect to be double digit double digit revenue this year.
So those would be the ones I would highlight I think got Vince.
Thanks for that and good quarter.
Thanks, so much Vince.
And with that that does conclude our question and answer session I would now like to turn the call back over to our presenters for any additional or closing remarks.
So let me close by saying, thank you to all of our professionals worldwide.
Their continued dedication to our clients and delivering our record first quarter results.
I think our people have a passion for delivering the best advice.
And support to our clients as they continue their digital journeys and I cannot be more prouder of our team worldwide and thanks to all of you on the call today for your continued support and confidence in ISG have a great rest of the day. Thank you.
And with that that does conclude today's call. Thank you for your participation you may now disconnect.
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