Information Services Group, Inc. Debt dropped on 14.8% and EBITDA decreased on 6.5%
03/14/2019 • About Information Services Group, Inc. (
$III) • By InTwits
Information Services Group, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 7.4% in 2018, 8.1% in 2017, 2.4% in 2016, 8.0% in 2015, 9.6% in 2014
- Information Services Group, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.1%. At the same time it's in pair with industry average of 7.4%
- CAPEX is quite volatile: $4m in 2018, $3m in 2017, $2m in 2016, $1m in 2015, $2m in 2014
- The company has business model with low profitability: ROIC is 7.2%
- It operates with high leverage: Net Debt/EBITDA is 3.9x while industry average is 2.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 2.3%. Revenue growth showed slowdown in 18Q4 - it was 1.9% YoY. During the last 5 years Revenue growth topped in 2017 at 24.5%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.4 pp from 1.1% to 2.5% in 2018.
Gross Margin showed almost no change in 2018. During 2014-2018 Gross Margin bottomed in 2016 at 38.9% and was growing since that time. SG&A as a % of Revenue increased slightly on 0.82 pp from 33.8% to 34.6% in 2018.
Net Income margin increased on 2.8 pp from -0.79% to 2.1% in 2018. During 2014-2018 Net Income margin bottomed in 2016 at -3.0% and was growing since that time.
Investments (CAPEX, working capital and M&A)
Information Services Group, Inc.'s CAPEX/Revenue was 1.5% in 2018. The company's CAPEX/Revenue increased slightly on 0.79 pp from 0.66% in 2015 to 1.5% in 2018. It's average CAPEX/Revenue for the last three years was 1.2%. During the last 5 years CAPEX as a % of Revenue bottomed in 2015 at 0.66% and was growing since that time.
Return on investment
The company operates at low ROIC (7.2%) and ROE (8.0%). ROIC increased slightly on 2.0 pp from 5.2% to 7.2% in 2018. ROE jumped on 11.5 pp from -3.5% to 8.0% in 2018. During the last 5 years ROIC bottomed in 2016 at -2.0% and was growing since that time. During 2014-2018 ROE bottomed in 2016 at -12.6% and was growing since that time.
Leverage (Debt)
Debt level is 3.9x Net Debt / EBITDA and 4.8x Debt / EBITDA. Net Debt / EBITDA decreased on 0.1x from 3.9x to 3.9x in 2018. Debt dropped on 14.8% while cash dropped on 34.4%. During the last 5 years Net Debt/EBITDA topped in 2016 at 16.6x and was declining since that time.
Information Services Group, Inc. has no short term refinancing risk: cash is higher than short term debt (225.9%).
Valuation and dividends
The company's trades at EV/EBITDA 11.8x and P/E 28.7x.
Management team
Information Services Group, Inc.'s CEO is Michael P Connors. Michael P Connors is a founder and has 12 years tenure with the company. Information Services Group, Inc.'s CFO David E Berger has spent 9 years with the company.
Financial and operational results
FY ended 12/31/2018
Information Services Group, Inc. ($III) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 209.6 | 209.2 | 216.5 | 269.6 | 275.8 | 2.3% |
| Gross Profit | 85.5 | 84.5 | 84.1 | 112.9 | 115.8 | 2.6% |
| SG&A | 65.4 | 67.8 | 78.9 | 91.0 | 95.4 | 4.8% |
| EBITDA | 20.1 | 16.7 | 5.3 | 21.9 | 20.4 | -6.5% |
| Net Income | 6.2 | 4.8 | -6.5 | -2.1 | 5.7 | |
Balance Sheet
|
|---|
| Cash | 27.7 | 17.8 | 34.5 | 28.4 | 18.6 | -34.4% |
| Short Term Debt | 3.9 | 2.3 | 5.5 | 15.5 | 8.3 | -46.8% |
| Long Term Debt | 49.4 | 47.9 | 116.5 | 98.8 | 89.2 | -9.7% |
Cash flow
|
|---|
| Capex | 2.2 | 1.4 | 2.4 | 3.2 | 4.0 | 26.2% |
Ratios
|
|---|
| Revenue growth | -0.6% | -0.2% | 3.5% | 24.5% | 2.3% | |
| EBITDA growth | 4.6% | -16.7% | -68.4% | 314.6% | -6.5% | |
|
|---|
| Gross Margin | 40.8% | 40.4% | 38.9% | 41.9% | 42.0% | 0.1% |
| EBITDA Margin | 9.6% | 8.0% | 2.4% | 8.1% | 7.4% | -0.7% |
| SG&A, % of revenue | 31.2% | 32.4% | 36.4% | 33.8% | 34.6% | 0.8% |
| Net Income Margin | 2.9% | 2.3% | -3.0% | -0.8% | 2.1% | 2.8% |
| CAPEX, % of revenue | 1.0% | 0.7% | 1.1% | 1.2% | 1.5% | 0.3% |
|
|---|
| ROIC | 12.3% | 10.1% | -2.0% | 5.2% | 7.2% | 2.0% |
| ROE | 14.7% | 11.1% | -12.6% | -3.5% | 8.0% | 11.5% |
| Net Debt/EBITDA | 1.3x | 1.9x | 16.6x | 3.9x | 3.9x | -0.1x |
Information Services Group, Inc. ($III) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 69 | 71 | 68 | 68 | | 3.5% | 4.4% | -0.6% | 1.9% |
| EBITDA | 4 | 6 | 5 | 5 | | -11.6% | 40.6% | -16.7% | -24.1% |
| Net Income | 0 | 2 | 4 | -1 | | | | 180.3% | |
Balance Sheet
|
|---|
| Cash | 31 | 19 | 14 | 19 | | -6.3% | -23.7% | -39.2% | -34.4% |
| Short Term Debt | 15 | 15 | 8 | 8 | | 136.9% | 114.0% | -44.3% | -46.8% |
| Long Term Debt | 97 | 93 | 91 | 89 | | -15.3% | -17.4% | -9.5% | -9.7% |
Ratios
|
|---|
| Gross Margin | 37.6% | 43.5% | 43.2% | 43.8% | | -1.3% | 2.6% | -0.9% | 0.1% |
| EBITDA Margin | 5.3% | 8.7% | 7.9% | 7.7% | | -0.9% | 2.2% | -1.5% | -2.6% |
| Net Income Margin | 0.2% | 3.3% | 5.9% | -1.3% | | 1.1% | 3.8% | 3.8% | 2.7% |
Peers in Data Processing & Outsourced S
Below you can find Information Services Group, Inc. benchmarking vs. other companies in Data Processing & Outsourced S industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.7% | 10.1% | 7.5% |
|---|
| Information Services Group, Inc. ($III) | | -0.2% | 3.5% | 24.5% | 2.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 38.4% | 39.5% | 39.5% | 38.9% | 40.9% |
|---|
| Information Services Group, Inc. ($III) | 40.8% | 40.4% | 38.9% | 41.9% | 42.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.2% | 21.3% | 21.1% | 19.4% |
|---|
| Information Services Group, Inc. ($III) | 9.6% | 8.0% | 2.4% | 8.1% | 7.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Information Services Group, Inc. ($III) | 1.0% | 0.7% | 1.1% | 1.2% | 1.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 14.1% | 13.1% | 11.7% | 10.7% | 12.1% |
|---|
| Information Services Group, Inc. ($III) | 12.3% | 10.1% | -2.0% | 5.2% | 7.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.4x | 0.5x | 1.3x | 2.3x | 2.0x |
|---|
| Information Services Group, Inc. ($III) | 1.3x | 1.9x | 16.6x | 3.9x | 3.9x |
