Information Services Group, Inc.

Good morning and welcome everyone to the Information Services Group first quarter conference call. This call is being recorded and will be available on ISG's website within 24 hours. Now I would like to turn the call over to Mr. Barry Holt for his opening remarks and introductions. Mr. 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 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 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 8K that was furnished last night to the SEC and the risk factor section in ISG's Form 10K covering full-year results. You should also read ISG's annual report on Form 10K 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 ISG's website at www.isg-1.com or the SEC's website at www.sec.gov. ISG undertakes no obligation to update or revise any forward-looking statement 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 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 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 8K, 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 revenue for the first quarter, our significant recurring revenue growth, our 2025 targets for margins and recurring revenues, under phase two of our ISG Next operating model, the increase in our dividend and our outlook for the second quarter. ISG delivered a strong start to the year, with revenues reaching an all-time quarterly high of $78 million, up 12% in constant currency, and led by 17% growth in the Americas, our largest region. We continue to expand our recurring revenues, reaching a record $33 million, up 27% versus the prior year, and representing 42% of our firm-wide revenues this quarter. Recurring revenues were driven by double-digit operating growth in our GovernX, vendor compliance, and risk management business, and in our research business. Our adjusted EBITDA reached a first-quarter record of $11 million, As you recall, we decided to further invest during the second half of last year in hiring additional talent in anticipation of growing client demand the next couple of years. That decision is beginning to pay off in our top-line growth. We expect this group to blend in from a productivity standpoint by mid-year. The client demand environment is being driven in two areas, ongoing transformation, both digital and business, and secondly, cost optimization. Transformation is focused on key digital areas, including customer experience, future workplace, cloud, cybersecurity, application modernization, and data analytics. In the end, it's all about creating a secure, intelligent, connected enterprise. Clients are also prioritizing transformation projects that focus on cost takeout, productivity, and quick returns. When it comes to cost optimization, they are taking one of two approaches, taking out cost and dropping the savings to the bottom line, or utilizing the savings to grow the business through digital initiatives. ISG is in an ideal position to help our clients power through in the current environment. Our portfolio of digital transformation, digital sourcing, and cost optimization services, supported by our proprietary research and SaaS platforms, continues to be a winning combination for our clients. Under our ISG Next operating model, we have realized tremendous results over the last two years. We have grown our adjusted EBITDA by more than 50% and our adjusted EBITDA margin by more than 30%, or about 375 basis points, due in large part to our efficient IFLEX delivery network and higher margin portfolio of solutions. We have also grown our client base by more than 20% to over 900 clients, thanks to our enhanced value proposition and solution-centric approach. ISG Next has served us and our clients very well during the pandemic years. Now in the post-pandemic era, we are ready to embark on phase two of ISG Next. By the end of 2025, We aim to expand our adjusted EBITDA margin a further 200 basis points from the end of 2022 to approximately 17% and accelerate the growth of our recurring revenues to $150 million after surpassing our previous target of $100 million last year. We are excited about the future of ISG and look forward to our next phase of growth as we prepare our clients now for the post-pandemic digital economy. We are already seeing early glimpses of what lies ahead. ChatGPT and other types of generative AI are grabbing headlines, but that's only the tip of the spear among the new technologies being developed today that will transform our world tomorrow. At ISG, we are harnessing our growing expertise in AI and applying it to our own operations and product development. For example, in 2022, we acquired a company called Agreement and its AI-driven smart contracting tool. We are now using Agreement to help drive recurring revenue growth in such areas as our flagship platform solution, ISG GovernX. There will be many more such developments going forward as we look to build out our repeatable platform capabilities, improve our efficiency, and deliver more value to additional segments of the market. ISG is built on a culture of innovation and entrepreneurship. I'm confident our unrelenting drive to excel will carry us into the future and allow us to capture the growth opportunities ahead and meet the 2025 targets we are unveiling today. Now turning to our regions, the Americas had an excellent Q1, delivering $48 million of revenue, up 17% versus the prior year, on the strength of our digital cost optimization and market-leading sourcing offerings. During Q1, we saw double-digit growth in our consumer, banking, insurance, manufacturing, energy, and utilities industry verticals. And among our services, network, software advisory, and GovernX were also all up double digits. Key client engagements during the first quarter included Bell Canada, C&O Financial Group, Owens & Miner, and Centene. During the quarter, a global IT service provider renewed its subscription to Pro Benchmark. our market-leading pricing research service for three years in a deal worth more than a million dollars. We also want a multimillion-dollar technology cost optimization engagement with a major managed healthcare provider covering many of our services, including operating model design, automation, benchmarking, network, software, and cybersecurity. Our holistic approach, we expect to save this client more than $100 million annually. In addition, we extended our ISG automation services and licenses for three years with a large Canadian telecommunications provider. Now, turning to Europe, our Q1 revenues of $23 million were up 5% in constant currency over last year. For the quarter, Europe delivered double-digit revenue growth in our media, energy, utilities, and manufacturing industry verticals, and in our GovernX network, software advisory, and research businesses. Key client engagements in Europe in the first quarter included Hygrieve, Munich Re, Union IT Services, and Belpheus Bank. During the quarter, the Ministry of Finance of one European country awarded ISG a million-dollar engagement to modernize their legacy application architecture. Scope includes IT service management and an identity and access management framework. We also won a million-dollar engagement with a major European banking company to redesign their technology delivery model and select new partners to support their future business and digital strategy. And we secured a significant extension with an oil and gas company in Germany to provide advisory and project management services on an SAP engagement. Now, turning to Asia Pacific, our Q1 revenues of $7 million were down about $200,000 in constant currency, or essentially flat with last year. We generated double-digit growth in our network, software advisory, and governance businesses. Key clients in the quarter included the Australian Department of Home Affairs and the Insurance Australia Group. In a very positive development, we very recently won a new $5 million contract with longtime client, the Australian Taxation Office, or ATO. to revamp their provider ecosystem and lay the groundwork for their digital future. Now turning to our dividend. In our ongoing commitment to reward shareholders, I am delighted to announce our board of directors has authorized a 12.5% increase in our quarterly dividend. The new quarterly rate, 4.5 cents per share, or 18 cents per year, will be reflected in our dividend payment on June 30 to shareholders of record as of June 7. This decision reflects our continuing long-term progress and outlook for the business. Now, let me turn to guidance. Even in an uncertain macro environment, demand for our services remains strong. Enterprises continue to invest in digital to maintain and build competitive advantage. and they are looking for ways to fund those investments by optimizing their technology and business environments. This is right in our sweet spot. ISG is the go-to partner for helping clients create their digital futures and achieve operational excellence. We are optimistic and energized by our prospects. We are also mindful of the economic factors that could impact the timing of client decision-making, including inflation, possible recession, geopolitical and banking concerns, and talent shortages. In consideration of all this, for the second quarter, we are targeting revenues of between $73 and $75 million, 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. Bert?