Good day everyone and welcome to the Information Services Group Second Quarter Results Conference Call. Today's conference is being recorded and a replay will be available on ISG's website within 24 hours. At this time it is my pleasure to turn the conference over to Barry Holt. Please go ahead.

Thank you, operator. Hello and good morning, everyone. My name is Barry Holt. I'm a Senior Communications Executive at ISG. I'd like to welcome everyone to ISG's 2013 Second Quarter Results Conference Call. I'm joined today by Michael Connors, Chairman and Chief Executive Officer; and David Berger, Executive Vice President and Chief Financial Officer. Before we begin I'd like to read the 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 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 yesterday to the SEC and the Risk Factor section in ISG's Form 10-K covering full year results. You should also read ISG's Annual Report on Form 10-K for the fiscal year ending December 31, 2011 and any other relevant documents, including any amendments or supplements to these documents filed with the SEC when they become available. You'll be able to obtain free copies of any of ISG's SEC filings on either ISG's website at www.isg-one.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. 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 8-K, which was submitted yesterday. And now I would like to turn the call over to Michael Connors, who will be followed by David Berger. Mike?

Well, thank you Barry. And good morning, everyone. Today David and I will review our record second quarter and first half results and financial highlights, update you on some business highlights, including our recent large contract win in managed services and conclude with an upward revision to our full year guidance for both revenues and adjusted EBITDA. We are pleased to close with record revenues for the second quarter of $55.6 million exceeding our previous high of $50.7 million. Revenue growth was 10% versus the prior year. Our recurring revenue streams of managed services, research and the U.S. public sector grew 15% over the prior year to $10 million in the second quarter and 20 million for the first half, up 26%. Recurring revenue streams have reached almost 20% of our revenues, well on target of 25% by 2015. Globally Blue Chip client wins for the quarter included Volkswagen, the Australian Department of Defense, Federal Express, KSW Bank, The UK Post Office, Western Union and Bayer. We also delivered record revenues for the six months of the year at $106.2 million, also up 10% versus the prior year behind double digit growth in both in Europe and the Americas, offsetting an anticipated decline in Asia Pacific. We served 336 clients in the first half. Our second quarter adjusted EBITDA was $6.5 million, up 22% versus last year and ahead of the consensus estimate. And adjusted EPS was up 46% to $0.09 per share. For the first half adjusted EBITDA of $11.6 million was up 37% versus the prior year with adjusted EPS of $0.15 per share, up 62%. While there are several factors driving ISG’s improved performance one of the most impactful was the investment we made in capabilities to broaden our client relationships. We have expanded our focus from…

Thanks, Mike and good morning everyone. Before I discuss our financial results I would like to reiterate that ISG has presented GAAP-financial results as well as certain non-GAAP financial information in our earnings release. During this call I will discuss certain non-GAAP financial measure which ISG believes improves the comparability of the company’s financial results between periods and provides a greater transparency of key measures used to evaluate the company’s performance. The non-GAAP measures which I will touch on today include adjusted EBITDA, adjusted net earnings and a presentation of selected financial data on a constant currency basis. A complete reconciliation of non-GAAP financial measures is included in our earnings release which was furnished to the SEC on Form 8-K yesterday. 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. We reported second quarter revenues of $55.6 million up 10% versus the prior year on a constant currency and on a reported basis. Revenues increased by 21% in Europe to $19.7 million, the first double digit growth in Europe in two years, and by 11% in the Americas to $30.2 million our ninth straight quarter of double digit growth. This was offset by a $1.4 million decline in Asia Pacific to $5.7 million. Gross rates are in constant currency. Operating income totaled $4.3 million for the second quarter of 2013 versus $2.3 million in the prior year period. The second quarter results include a non-operating gain of $500,000 associated with the retirement of a portion of the convertible loan notes which was offset by a $400,000 non-cash charge associated with the early retirement of the existing term loan. Fully diluted earnings per share for the quarter was $0.06 which compared to $0.02 for…

Okay. Thank you, David. We are very pleased with our first half results and optimistic about the outlook for the full year. In summary the second quarter was a record revenue quarter up 10% and that helped contribute to record revenues for the entire first half. Our recurring revenue streams of research, managed services in the U.S. public sector of $20 million for the first half was up 26% and that reached almost 20% of our total revenue. So making great progress there. At the half year mark revenue per client is up 19%. The second quarter EBITDA was up 22% and the half 37%. We signed the largest managed services contract ever over $40 million in recurring revenues. The Americas continued on its growth trajectory with ninth straight quarter of double digit increases. And Europe recorded first double digit revenue growth quarter in two years, up 21% and in April we announced our big win in the UK public sector with the Ministry of Defense. We feel we are very well positioned now in this growing market. In the quarter we signed our new credit agreement and the market is beginning to recognize our financial performance with our share price up over 100% this year. I want to thank you very much for calling in this morning and let me turn the session over to the operator.

Thank you. (Operator Instructions). Our first question will come from Marco Rodriguez with Stonegate Securities.

Good morning guys. Thank you for taking my questions.

Good morning, Marco.

I was wondering if may be you could talk a little bit more about the revenues in the quarter. Were there any large deals or big deals or a little bit out of the ordinary that kind of helped out in the quarter?

No Marco this was, I think just a continuation of what we began to see last year as we integrated all of our businesses together, had a broader set of products and service offerings. We are getting a larger share of the client wallets during the quarter but there was no special big deal in the quarter, or anything to help spike the revenue. I’ll say continuation of what we’ve been building on.

Got it. And how much revenue was there in the quarter from the Ministry of Defense?

I don’t know that we’re breaking that out but I’ll give you the overall public sector revenues. I believe for the first half over in the UK we were roughly about $3 million.

Okay. And if I remember correctly that contract, it obviously would be recognized over a period of time and it is a little bit more front-end loaded if you will. How should we think about the rest of the revenues for that particular contact as the year progresses? How should we think about the trend?

I think what we had estimated, just going back to make sure we are all together that contract was a $28 million U.S. contract, roughly in the translation on the current, say I think around $28 million. Our portion of that is roughly kind of 20% to 25%. I think we estimated that we would get, I don’t know if we give a number there David on.

I think it was, I don’t think we gave a number on that Marco but it’s few million dollars this year because it didn’t start ramping up till towards the end of Q2.

Okay.

So I think the one thing we should look at is the public sector, the Ministry of Defense contract it’s good one but what has enabled us to do as I mentioned earlier we now have penetrated a number of the UK government agencies now. So it’s much broader than Ministry of Defense. And we think that will serve us for the next few years.

Got it and then just a clarification here. You mentioned Mike these are 3 million of public sector there back in Europe is that correct or is that in aggregate?

Yes. That’s in Europe.

Okay. Got it. And then kind of in the same vein you did talk a little bit more about the public sector in the Americas or the U.S. what sort of percentage of revenue is in the Americas or the U.S. what sort of percentage of revenue is in there?

The revenue there just to kind of box that for you is 2012 we did about $15 million in the U.S. public sector business. So that was out of 192 that business I think I mentioned it is growing at kind of the rate of 20%. So if it continues on that line we would expect that business to generate about $18 million or so of revenue in 2013 up from 15.

Perfect, okay. And then shifting gears here to the large managed services contract with Marriott, if I heard that correctly $14 million over five years is that going to be a straight line kind of recognition or how should we think about that?

Yeah, it's roughly straight line on that.

And obviously a very large contract, can you talk a little bit about the dynamics that kind of went in there, how long you guys been talking to Marriott and what kind of finally got them over the goal line?

Yeah so Marriott we have been in [inaudible] they are now well over a year about a year and half I believe now. We have helped Marriott with significant transformation of their business as cloud and mobile technologies have emerged. Marriott CIO is quite on the leading edge and is using all the technologies available to help enhance the Marriott customer experience. So we have been in there helping them everywhere from creating a business case to helping them to design a strategy, to helping them manage several transactions with new suppliers or helping them on transition and this was kind of a natural evolution that we would be there to help them manage a series of sourcing agreements, everything from data centers to network to the help desk, if you will. And that’s how that emerged. So it emerged over a period of time. We begin talking with them about governance early on as we do with all clients and we secured the transaction late in the second quarter.

Okay. And would you say was there any competition for that particular contract?

I think the best way I would describe it is I think we have been a very trusted adviser to Marriott and therefore we were the natural selection.

Got it, okay. And then just kind of curious obviously you guys have made a lot of investments over the last few years and have changed the branding and the messaging somewhat here to client to kind of attain more of a share of wallet. Have you done anything slightly differently since you have made those strategic changes that is maybe carrying more momentum with your clients currently or do you think it’s just all the investments are just kind of starting to bearing fruit here?

Well I think our investments are certainly bearing fruit. I think our value proposition to our clients because of the long-term relationships we have had with many of our clients. As we have said before about 75% of our clients are the same clients year-after-year-after year or they refer us to a colleague and recommend us based on the experiences we had. I think our tool kit is now broader and we are able as I mentioned early on in my remarks earlier that we are able to start at the beginning help them identify opportunities, help them identify how they become more operationally excellent. Everything from benchmarking to creating a business case for change to designing a strategy using all emerging technologies available for them to helping them do the actual transition and then all of the post transaction work which is still relatively new for our business, maybe in the last three years and that has really picked up some momentum. So I think that would be how we would describe how this has evolved Marco.

Got it. And once last quick question here and I will jump back in queue, but are there any other major investments or initiatives that you might be planning for the remainder of the year?

No other than clearly as we sign on like Marriott we are staffing up now in India as that contract will kick off in the third quarter. So there will be a number of people hired. So our staff count I would expect to be higher in the third quarter than it has been in the first and second quarter. We will probably hire well over 20 people to manage that Marriott account. So other than matching up people with revenue that’s what we see kind emerging. We are putting people with revenue, that’s what we see kind of emerging. We are putting a little money also into our research business. We very much want to drive research because we think that research capability driving into our distribution channels that we current have in the [C suite] is another natural evolution for us. So we’re continuing to look for opportunities to do that so that’s kind of what we have planned for the balance of the year.

Got it. Thanks a lot guys.

Thank you, Marco.

And we’ll go next to Vincent Colicchio with Noble Financial Group.

Good morning guys, nice quarter.

Good morning. Vince.

Good morning. A lot of my questions were asked but still a few more. It seems that we’re going to have a stronger second half activity in general. If I look at your own index as sort of other anecdotal data points, so I am curious are you embedding in your second half outlook, let me step back this again, and also anecdotal information is indicating that we will have a better second half in terms of momentum. So are you embedding that in your outlook that’s the first question?

I mean of course I mean keep in mind we have a very strong first half. The industry had a, the overall industry had a very weak first half. So that’s not necessarily all aligned from a timing standpoint Vince on how that occurs. But in terms of how we've given our guidance I think I tried to outline we have during the second half we have the European vacations, we have the U.S. holidays, Thanksgiving, Christmas and what happens is clients if they decide to shutdown which some of our manufacturing clients shut down for one to two weeks. Some of them take their own vacation times. They normally then do not want us working at a full speed when they are not working at a full speed. So we’re at the mercy a little bit of how they decide to manage that. So we are cautious about the number of days that we have and we can’t plan them precisely because we’re at the mercy how our clients operate. So that’s why we’re always a little careful on the second half in terms of number of days so that’s how we try to guide.

Okay. And then I think earlier you mentioned Michael one of the wins you had was with the Australian Department of Defense. So is that a sign that we'll start to see the Australian business come back as you expected?

It’s a very good question. I think I have to say yes. We think so because we also want a little bit of businesses smaller but with the taxing authorities in Australia we know it's been uncertainty there with the changeover with the current administration where they bumped one out, put the previous leader in and now he is called for the elections in early September. So all of that kind of puts everybody on the heels a little bit. So I think from that standpoint we’re cautious. I think we’ll see it more in 2014 than 2013 but yes we do see some signs there. We just want the elections to get over with and get the uncertainty out of the market.

On the managed services side do you, what does the pipeline look like do you have other potential large deals out there?

Yeah, I mean the managed services business as we’ve stated we’ve gone from zero to I think was around $17 million last year and just a matter of few years we expect that business to grow 20% a year for the foreseeable future. These are long sales cycles because normally what happens is just like Marriott we begin the discussions with them early on. The governance really does not kick in until these contracts are secured and over the line. Then you begin to put the governance into place. So we do have a solid prospect pipeline but I couldn’t foresee exactly when those things would come to fruition. It just takes a while. But we are very pleased with that business it’s growing 20% plus a year and it's all recurring revenue streams multi-year, multi-million dollar business. So we have a full line.

In Europe it seems the utilization rate is obviously improved. Looking at, taking [inaudible] needs to hire versus how much slack you have where should we see the utilization rate trending in the second half?

David?

Yeah I mean it’s at 71. We would expect to be, we try to move it close to the mid-70s as possible. I mean we are going to have to hire some additional resources in Europe. And overall we are looking to bring on more resources in managed services. So you know there won’t be a significant shift but we do look to continue to approve utilization.

In the second half.

Yeah. But again the issue is the vacations, that offsets some of that as well.

And one last one here, how is the Semex relationship progressing and has that deal sort of helped to get referrals to other deals in the region.

You know good question here. We are still very much engaged with Semex, not only on the initial piece of work around a lot of those technology areas where we are helping them now with the transition with IBM and others. We also have a multiyear managed services agreement with Semex. We are back into Semex working on other areas that their CEO and CFO have asked us to look at and clearly that business we have gotten a referral or two from Semex to other new clients and that’s kind of how all this works for us that we did great returns for our clients and then they in fact help in terms of referring us to their colleagues. So Semex continues to be a very important strategic relationship for us.

Again a great quarter guys. Thanks for answering my questions.

Okay, Vince. Thank you.

That will conclude our question-and-answer session I’ll turn the call back over to our speakers for any additional or closing remarks.

Okay, thank you, operator. Look above all I would like to thank all of my 800 plus colleagues around the world for your continued passion and tremendous dedication to our clients and for our strong performance delivered here in the first half. We are beginning to see the fruits of all of their efforts and it’s leading the way as we continue to build on our market leadership this year and the years ahead. I also want to thank all of you on the call and all of our investors for your continued support and confidence in our firm. Thanks again for joining us today and have a great week.

Thank you. Once again that will conclude our call. Thank you all for your participation. You may now disconnect.