Information Services Group, Inc. reports 22.0% EBITDA decline in 2020 and 6.3% Revenue decline
03/11/2021 • About Information Services Group, Inc. (
$III) • By InTwits
Information Services Group, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 7.1% in 2020, 8.6% in 2019, 7.4% in 2018, 8.1% in 2017, 2.4% in 2016
- Information Services Group, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%.
- The company has potentially unprofitable business model: ROIC is 5.3%
- It operates with high leverage: Net Debt/EBITDA is 2.3x while industry average is 1.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Information Services Group, Inc.'s Revenue decreased on 6.3%. Annual revenue decline showed slowdown in 20Q4 - revenue increased slightly on 1.4%. During the last 5 years Revenue growth topped in 2017 at 24.5% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.1 pp from -6.2% to 0.91% in 2020.
Gross Margin decreased on 2.5 pp from 42.4% to 39.8% in 2020. During the last 5 years Gross Margin topped in 2019 at 42.4%. SG&A as a % of Revenue decreased slightly on 1.2 pp from 34.8% to 33.6% in 2020.
Net Income margin showed almost no change in 2020. During 2016-2020 Net Income margin topped in 2018 at 2.1% and was declining since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.47% in 2020. CAPEX/Revenue decreased slightly on 0.70 pp from 1.2% in 2017 to 0.47% in 2020. It's average CAPEX/Revenue for the last three years was 0.88%. During 2016-2020 CAPEX as a % of Revenue topped in 2018 at 1.5% and was declining since that time.
Return on investment
The company operates at low ROIC (5.3%) and ROE (2.9%). ROIC decreased on 2.5 pp from 7.8% to 5.3% in 2020. ROE decreased slightly on 1.1 pp from 4.0% to 2.9% in 2020. During the last 5 years ROIC topped in 2019 at 7.8%. During the last 5 years ROE topped in 2018 at 8.0% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.3x and Debt / EBITDA is 4.8x. Net Debt / EBITDA dropped on 1.0x from 3.3x to 2.3x in 2020. Debt decreased on 9.7% while cash surged on 141%. Net Debt/EBITDA followed a declining trend in 2016-2020.
Information Services Group, Inc. has no short term refinancing risk: cash is higher than short term debt (638.4%).
Valuation and dividends
The company's trades at EV/EBITDA 13.6x and P/E 73.0x.
Management team
Information Services Group, Inc.'s CEO is Michael P Connors. Michael P Connors has 14 years tenure with the company. The company's CFO is David E Berger. David E Berger has 11 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
Information Services Group, Inc. ($III) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 216.5 | 269.6 | 275.8 | 265.8 | 249.1 | -6.3% |
| Gross Profit | 84.1 | 112.9 | 115.8 | 112.6 | 99.3 | -11.8% |
| SG&A | 78.9 | 91.0 | 95.4 | 92.5 | 83.8 | -9.4% |
| EBITDA | 5.3 | 21.9 | 20.4 | 22.8 | 17.8 | -22.0% |
| Net Income | -6.5 | -2.1 | 5.7 | 3.3 | 2.8 | -17.5% |
Balance Sheet
|
|---|
| Cash | 34.5 | 28.4 | 18.6 | 18.2 | 43.7 | 140.9% |
| Short Term Debt | 5.5 | 15.5 | 8.3 | 14.0 | 6.9 | -51.1% |
| Long Term Debt | 116.5 | 98.8 | 89.2 | 79.8 | 77.9 | -2.4% |
Cash flow
|
|---|
| Capex | 2.4 | 3.2 | 4.0 | 1.9 | 1.2 | -38.6% |
Ratios
|
|---|
| Revenue growth | 3.5% | 24.5% | 2.3% | -3.6% | -6.3% | |
| EBITDA growth | -68.4% | 314.6% | -6.5% | 11.3% | -22.0% | |
|
|---|
| Gross Margin | 38.9% | 41.9% | 42.0% | 42.4% | 39.8% | -2.5% |
| EBITDA Margin | 2.4% | 8.1% | 7.4% | 8.6% | 7.1% | -1.4% |
| SG&A, % of revenue | 36.4% | 33.8% | 34.6% | 34.8% | 33.6% | -1.2% |
| Net Income Margin | -3.0% | -0.8% | 2.1% | 1.3% | 1.1% | -0.2% |
| CAPEX, % of revenue | 1.1% | 1.2% | 1.5% | 0.7% | 0.5% | -0.2% |
|
|---|
| ROIC | -2.0% | 5.2% | 7.2% | 7.8% | 5.3% | -2.5% |
| ROE | -12.6% | -3.5% | 8.0% | 4.0% | 2.9% | -1.1% |
| Net Debt/EBITDA | 16.6x | 3.9x | 3.9x | 3.3x | 2.3x | -1.0x |
Information Services Group, Inc. ($III) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 64 | 57 | 62 | 66 | | -1.7% | -14.8% | -9.6% | 1.4% |
| EBITDA | 1 | 7 | 5 | 4 | | -53.4% | 11.1% | -43.0% | -44.1% |
| Net Income | -1 | 1 | 2 | 1 | | - | 47.8% | 18.7% | -30.9% |
Balance Sheet
|
|---|
| Cash | 17 | 32 | 38 | 44 | | 27.9% | 203.1% | 168.4% | 140.9% |
| Short Term Debt | 4 | 4 | 4 | 7 | | -64.2% | -66.3% | -67.9% | -51.1% |
| Long Term Debt | 86 | 80 | 78 | 78 | | -6.3% | -13.5% | -13.4% | -2.4% |
Ratios
|
|---|
| Gross Margin | 35.6% | 41.2% | 40.4% | 42.2% | | -1.5% | -2.2% | -4.3% | -2.0% |
| EBITDA Margin | 1.3% | 11.4% | 7.4% | 6.2% | | -1.4% | 2.7% | -4.3% | -5.1% |
| Net Income Margin | -2.1% | 1.1% | 3.3% | 2.2% | | -0.7% | 0.5% | 0.8% | -1.0% |
Peers in Data Processing & Outsourced Services
Below we provide Information Services Group, Inc. benchmarking against other companies in Data Processing & Outsourced Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Square, Inc. ($SQ) | - | 29.6% | 49.0% | 42.9% | 101.5% |
| Global Payments Inc. ($GPN) | - | 37.2% | -15.3% | 45.9% | 51.1% |
| Fiserv, Inc. ($FISV) | - | 3.5% | 2.2% | 74.9% | 45.8% |
| NIC Inc. ($EGOV) | - | 5.8% | 2.5% | 2.7% | 30.0% |
| StoneCo Ltd ($STNE) | - | 74.3% | 106.0% | 63.1% | 28.9% |
| |
|---|
| Median (39 companies) | 6.7% | 10.1% | 7.5% | 11.5% | -2.7% |
|---|
| Information Services Group, Inc. ($III) | - | 24.5% | 2.3% | -3.6% | -6.3% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Verra Mobility Corp ($VRRM) | - | 97.4% | 97.5% | 95.7% | 91.5% |
| EVO Payments, Inc. ($EVOP) | - | - | - | 80.2% | 80.8% |
| StoneCo Ltd ($STNE) | 69.7% | 70.8% | 79.5% | 83.4% | 76.8% |
| WEX Inc. ($WEX) | 54.7% | 58.8% | 63.3% | 61.7% | 56.8% |
| Sabre Corporation ($SABR) | 32.2% | 30.1% | 27.8% | 56.6% | 56.6% |
| |
|---|
| Median (31 companies) | 39.5% | 38.9% | 40.9% | 40.3% | 36.5% |
|---|
| Information Services Group, Inc. ($III) | 38.9% | 41.9% | 42.0% | 42.4% | 39.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Visa Inc. ($V) | 55.6% | 69.2% | 65.8% | 68.1% | 68.5% |
| Mastercard Incorporated ($MA) | 56.9% | 56.5% | 51.8% | 60.9% | 56.6% |
| FleetCor Technologies, Inc. ($FLT) | 52.0% | 50.8% | 55.9% | 57.6% | 52.2% |
| StoneCo Ltd ($STNE) | 31.4% | 26.0% | 53.0% | 62.4% | 52.1% |
| Black Knight, Inc. ($BKI) | 43.0% | 44.6% | 43.3% | 46.0% | 44.9% |
| |
|---|
| Median (38 companies) | 21.3% | 21.1% | 19.4% | 22.2% | 19.1% |
|---|
| Information Services Group, Inc. ($III) | 2.4% | 8.1% | 7.4% | 8.6% | 7.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| PagSeguro Digital Ltd. ($PAGS) | 6.4% | 4.3% | 1.4% | 5.8% | 22.3% |
| StoneCo Ltd ($STNE) | 7.2% | 18.4% | 8.9% | 12.9% | 11.2% |
| Cardtronics plc ($CATM) | 9.9% | 9.6% | 8.0% | 9.3% | 8.3% |
| Verra Mobility Corp ($VRRM) | - | 11.5% | 7.2% | 6.6% | 6.2% |
| Fiserv, Inc. ($FISV) | 5.3% | 5.0% | 6.2% | 7.1% | 6.1% |
| |
|---|
| Median (38 companies) | 3.2% | 2.9% | 3.2% | 3.3% | 3.1% |
|---|
| Information Services Group, Inc. ($III) | 1.1% | 1.2% | 1.5% | 0.7% | 0.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Mastercard Incorporated ($MA) | 57.5% | 60.6% | 64.7% | 72.7% | 47.6% |
| International Money Express, Inc. ($IMXI) | -1.3% | -1.4% | 12.1% | 36.0% | 31.4% |
| NIC Inc. ($EGOV) | 63.1% | 52.1% | 39.3% | 26.5% | 30.8% |
| Visa Inc. ($V) | 18.1% | 21.9% | 23.0% | 27.2% | 23.2% |
| Western Union Company (The) ($WU) | 10.7% | 11.9% | 27.8% | 21.5% | 22.1% |
| |
|---|
| Median (39 companies) | 11.7% | 10.7% | 12.1% | 8.3% | 6.4% |
|---|
| Information Services Group, Inc. ($III) | -2.0% | 5.2% | 7.2% | 7.8% | 5.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| WEX Inc. ($WEX) | 6.7x | 4.4x | 3.1x | 3.4x | 12.1x |
| Exela Technologies Inc ($XELAU) | 8.1x | - | 9.7x | - | 10.7x |
| Alliance Data Systems Corporation ($ADS) | 10.7x | 10.1x | 9.0x | 11.7x | 9.2x |
| Verra Mobility Corp ($VRRM) | - | 10.7x | 6.9x | 3.5x | 4.7x |
| GreenSky, Inc. ($GSKY) | -1.5x | -1.5x | 0.5x | 1.5x | 4.6x |
| |
|---|
| Median (35 companies) | 1.3x | 2.3x | 2.0x | 2.1x | 1.9x |
|---|
| Information Services Group, Inc. ($III) | 16.6x | 3.9x | 3.9x | 3.3x | 2.3x |
