Ladies and gentlemen, good day, and welcome to the Information Services Group Fourth Quarter Conference Call. Today's conference is being recorded and a replay will be available on ISG's website within 24 hours.At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Barry Holt. Please go ahead sir.

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 fourth quarter 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 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 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 statements contained in our Form 8-K that was furnished last night with the SEC in 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 and any other relevant documents including any amendments or supplements to these documents filed with the SEC. You will 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 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 a greater transparency of key measures we 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 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 David Berger. Mike?

Thank you, Barry, and good morning, everyone. ISG had a strong fourth quarter with growing profitability, strong cash generation and continued progress in digital. In the quarter EBITDA margin rose again to nearly 15%, as we delivered $10 million of EBITDA, up 12% year-over-year. This capped the strong second half that’s also to achieve our most profitable six months ever, with record EBITDA of nearly $20 million.Fourth quarter operating income also rose strongly up 52% to $5 million. Our more profitable mix of client solutions is driving on margin expansion. Revenue from higher margin Digital Services was more than 45% of our total in the fourth quarter. For the quarter, revenues were $66 million, a bit lower than projected due to the timing of a due engagements. Among our regions, Asia Pacific returned to double-digit growth up 15%.We also continue to invest in the development of our ISG platform for clients. Our first product of this platform is a compliance and third-party risk management product called GovernX 2020, that will add to our subscription based recurring revenues. GovernX 2020 is now operational, and producing results for such blue chip clients as McDonald's, Carnival, Johnson Controls, Marriott and Abbott.Globally in the quarter, we saw double-digit revenue growth in our insurance and technology industry verticals, and our research organization change management and HR tech services. We finished the year in a very strong financial position. In the fourth quarter, we generated $15 million in cash from operations, allowing us to reduce our debt by a further 10% or $10 million in the quarter. Our strong financial position also allowed us to renegotiate our credit agreement. We were able to reduce our required principal and interest payments by more than $14 million over the next two years, freeing up cash for the firm…

Thanks, Mike, and good morning everyone. Revenues for the fourth quarter were $65.5 million compared with $67.9 million in the prior year, a decrease of 2% in constant currency and a decline of 4% on a reported basis. Currency negatively impacted reported revenues by $1 million versus the prior year. Reported revenues were $37.3 million in the Americas down 2%, $23.2 million in Europe, down 6% in constant currency and down 8% on a reported basis, and $5 million in Asia Pacific, up 15% in constant currency and up 11% on a reported basis.Fourth quarter 2019 adjusted EBITDA was $9.6 million, up 12% compared with $8.6 million in the prior year's fourth quarter. We reported fourth quarter operating income of $5.1 million, which was up 52% compared with operating income of $3.3 million in the prior year.Net income for the fourth quarter was $2.1 million, compared with a net loss of $900,000 in the fourth quarter of 2018. Reported fully diluted earnings per share was $0.04, compared with fully diluted loss per share of $0.02 for the same period in 2018.Adjusted net income for the 2019, fourth quarter was $4.8 million or $0.10 per share on a fully diluted basis, compared with adjusted net income of $2.3 million or $0.05 per share on a fully diluted basis in the prior year’s fourth quarter.Consultant utilization for the fourth quarter was 63%. Quarter end headcount was 1287 essentially flat with last quarter, as we continue our own automation and productivity initiatives.Our balance sheet continues to have the strength and flexibility to support our business over the long-term. Net cash provided by operations for the fourth quarter was $14.6 million or $20.4 million for the full year. We paid out $9.6 million of debt in the fourth quarter and $12.3 million for the…

Thank you, David. To summarize, building on our second half momentum, we entered 2020 a stronger firm in terms of cash, financials and flexibility. We had one of our most profitable quarters ever in Q4 capping the second half that saw us deliver the best adjusted EBITDA in our history of nearly $20 million. Our Go Digital strategy continues to work with our more profitable digital services representing more than 45% of our firm revenue. We generated $15 million in cash in the quarter lowered our debt balance by 10% or nearly $10 million. 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.So thanks very much for calling in this morning. And now let me turn the session over to the operator for questions.

Thank you, sir. [Operator Instructions]. Our first question comes from Mr. Joe Gomes with NOBLE Capital.

Good morning and thanks for taking the questions.

Good morning Joe.

Just wonder if you might be able to touch on the ISG automation. I know you set a goal this year to be, north of the $30 million revenue range, is that still you guys are expecting or are given some of the headwinds or you think that's going to be a little bit lighter this year?

Well, for 2020, we definitely think we will have significant double-digit growth. We are targeting internally to be in and around the $30 million level. And we'll see how the market conditions warrant, but it will certainly be a significant growth. But that is our target.

Okay, great. And nice work there on the new credit agreement. And then you talked in the past about, especially here again on the ISG automation and some on the call today about, possibly being the consolidator. And do you guys have a pipeline of acquisitions that you're looking at, I mean how should we think about that in terms of timing?

Yes, so, we do have a pipeline of possible acquisitions, both in automation and in some of the other growth areas that we are working on that drive recurring revenue, software, digital areas. So we are looking at those, as always, we're very disciplined in our approach. But, more news later on those. But, we do have a good solid pipeline.

Okay, great. And just -- last one more and I’ll get back in the queue. So your guidance for Q1 you are suggesting basically flat year-over-year revenues. Is that kind of all the virus related this year or is there some other parts of the business that are a little bit softer than you guys had had expected?

No, it's -- we're being conservative with the virus, frankly. So we have a plan. We know that several large events were canceling during the first quarter in March. We are anticipating a little bit of slower decision making. So we're doing that as our best kind of knowledge for today, and trying to be as conservative as we can, based on what we know. So that's why we're coming in there. But, you'll note that the mix will be better. And thus the profitability despite that will be higher, much higher than a year ago. At least that's what we think our plan is based on what we know today, Joe.

Okay, great. Thanks, guys. Appreciate it.

Yes. Thank you.

Thank you. Our next question comes from Mr. Vincent Colicchio with Barrington Research.

Yes. Good morning, Mike.

Good morning Vincent.

You had mentioned that some engagements were pushed out in the Americas, can you give us more color on that? And if you expect that to come back?

Yes, so primarily around network and a few automation engagements were pushed out into -- we think will be the first quarter, I will say that they are slow to get closed on the network in particular, we cannot recognize the revenue until we have sign-off with the virus. I would say there's a little bit of a distraction factor, but it was small, I would say it was in the $1 million kind of range events, but we do expect to have all of that revenue. But, right now, I don't know if it'll end up being closed in Q1 or not.

And David, you had mentioned, your [indiscernible] flat headcount in Q1 as you continue automation initiatives. Maybe Mike want to stuck with this too. Are you wrapping that up and should we see, better productivity going forward or might just look too far into that?

Well, I think first of all, I think the productivity is higher. If you look at the profitability over the last six months, we're continuing to utilize our India center of excellence and moving work to India – the client work to India, which is enabling us to improve, if you will our productivity. And the second aspect of this [Joe] is the mix that we have with some of our recurring revenue streams and our digital services which are in higher demand. Therefore, we can have a bit more of premium pricing if you will, in those areas. Those factors are all included into why the profitability is higher, and why we can see more profitability per dollar of revenue.

And Mike you mentioned, we've got some close take up project opportunities around the virus has substantial opportunities that -- could that be meaningful?

Yes, I think the three areas that we see that are the demand, high demand that we're being called in right now is travel, hospitality and oil and gas. All three hit, as you’ll know, quite harshly. So, they're looking at our rapid cost takeout services that we can help them with. And as I said, we are now deployed in several clients at the moment executing as quickly as we can with the clients in cost takeout. So, we think that will help us as we especially move into Q2, as enterprise clients are now reacting here in March to what is happening, and we're getting kind of mobilized with the clients. So ,we believe it could help us nicely in Q2.

Okay. I’ll go back in the queue. Thank you.

Okay. Thank you.

Thank you. Our next question comes from Mr. Marc Riddick with Sidoti.

Hi, good morning, gentlemen.

Good morning Marc.

So I really appreciate all that the color around the opportunities that you're seeing and especially the commentary around what you're seeing the enterprise clients, I was wondering if could spend a little bit of time a lot of the comments, of course that we've heard from companies are around the avoidance of co-location in order to provide opportunities to avoid the disease spread. I wanted to see if there was any sort of historical examples or some commentary that you might be able to provide as far as the opportunity for future revenue growth generation opportunities from those efforts, if there's something that you could sort of talk about a little bit there?

Well, first of all, from a enterprise client standpoint, some of the work that we have been asked to come in and help is, if you think about a lot of a large service and technology providers that have very large employee counts under our roof or under our campus setting like you see in Bangalore and Mumbai, etc. And when there is disruption or shut down what does that mean for the enterprise client? How will they continue to be able to mobilized execute against their initiatives, etc. And we are working in concert with all the service providers and enterprise clients to minimize business continuity issues.Now, in terms of what it might bring down the road from future. I don't have a good answer for you today on that. But, I would say to you, that I think many are looking at this as more of a temporary or near-term issue versus some type of sustainable change in their business structure going forward at this point in time, although it's early.So, I don't know that we see that. Yes, if I can respond that way. I would say on the flip for ISG, we are, in some ways in a good position, because we are a mobile virtual company anyway, that's how we were born that way here. So, we have about 80% of our teams that work in a virtual environment or a client environment every day. So, having our work moved from, for example, at an enterprise client site, to off-site or to remote is very natural for all of our team members. So, at least from that standpoint, from an ISG standpoint, it's quite natural, if you will, for us to operate our business that way. But, on the enterprise side, that's what we're seeing at the moment.

Okay, great. Thank you for the color there. And I was wondering then switching to -- I wanted to see if they could a little bit of an update around the use of cash priorities and, certainly it's been a significant progress that you guys have made as far as debt reduction and sort of getting to where you are now. And now that you've kind of -- and then now that you've gotten there with the work that's been done over the last several quarters, I wanted to know if you could sort of give a bit of an update there as to, now that you have a little bit more meaningfully, more flexibility than where you are say a year ago.

Yes, thanks for that. As we indicated, we did generate $15 million in the quarter. We pay down $10 million of debt. In terms of 2020, we would be looking at increasing the amount of share buybacks as you know, we were limited, last year we did $3.4 million, we would see increasing that. And we would see continuing to drive our leverage ratio down to around 2.5 times and then as Mike indicated, evaluate some of these opportunities -- acquisition opportunities in the pipeline.

Okay, great. Thank you very much. And then one last thing from me. So, you mention as far as what you're looking at with events, which is certainly understandable, I was wondering if you could just sort of -- just a quick reminder as to maybe the timing of events during the course of the year and sort of how that flows, because I think you had more, a few more scheduled this year than last year. So, I was wonder, if you could you just touch on what we should look for there?

Yes, so we had approximately -- I think, was 19 or 20 events in 2019. We had planned on that being in the 25 range this year. And they are scattered relatively evenly across the quarters through the course of the year. So what we're looking at the moment is the balance of March and April, where we're going to postpone what we had on the schedule. And our plan at the moment is we're going to retain what we have may going forward, pending how this evolves and unfolds over the next month. If it stays in this kind of environment, then we would likely move or may events as well, but we don't need to make that call at the moment. But, that's kind of how our events roll out.

Okay, great. That makes sense. Thank you very much.

Yes, thank you.

Thank you. Our next question comes from Mr. Marco Rodriguez with Stonegate Capital Markets.

Good morning, guys. Thank you for taking my questions.

Good morning, Marco.

Hey, a couple of quick follow-ups. First off, on the ISG automation business. What was the revenue run rate you guys exit in Q4?

We are not communicating the exact number, but the overall revenue is in or around 10% of our revenue.

Got you. And the time, I was wondering, maybe you can help frame a little bit more the timing of hitting that $30 million kind of revenue run rate goal or -- just more kind of a second half, or do you think it's a Q4 fiscal ‘20 type event?

We currently have our plan would be to exit 2020 [with a three]. That's the current plan. We'll see how the market conditions were and the speed, but it will be a significant growth this year.

Got it. Then in terms of your guys guidance. I just wanted to clarify something here for Q1 adjusted EBITDA at about $5 million, if I'm remembering correctly, but I do recall here in some investments that you'll be making in Q1 as well, that will -- I guess, kind of act as a $1 million headwind. So, is that inclusive of your $5 million guidance is inclusive of that additional investment or is that something that will bring you down?

Yes. No, Marco that that is inclusive and without the investment of course, that number we would have had it higher, but we did spend some money and we think it would be prudent. But that is inclusive.

Got you. Okay. And then lastly, just kind of wondering if you could help frame a little bit better and I know this is difficult just your overall general sense of fiscal ‘20 growth. You guys are obviously said that you're looking for some growth in fiscal ‘20 on the revenue side, obviously a lot of unknowns, right now with the Corona virus’ impact here. Are you kind of thinking the growth might be a little bit more muted first half just in terms of the impact of the Corona virus or there's some other thoughts you have around how that growth kind of plays out your fiscal ‘20?

Well, of course, we're moving this in real time, Marco. But, the answer is, of course, the early half is going to be a little slower than the back half with the virus. So, I think the answer is, we would see acceleration as we go through the year Q2, we have good plans, good growth plans in Q2, we have to see how the environment and we’ll adjust accordingly. So, we're not giving the full year guidance only because, I think there's a little bit too much unknowns, but we do have growth plans in place. But, I would expect the acceleration certainly to be greater in the second half than in the first half because of the virus.

Got it. And last question, if I might, just in terms of the acquisition landscape for you guys, is your anticipation or you leaning more towards this smaller kind of bolt-on acquisitions that you can maybe deploy just cash or you thinking of more types of transformational [indiscernible] type acquisitions there?

Well, we have -- we always have two streams going Marco, one is what we call, our string of pearls -- approach, which are the bolt on using cash and are now a concept that we've been very successful than in the past. And then the second stream of course is, we're always in the market, if there is a transformational deal that makes sense. And so, both of those were always on the table for us.

Got it. Thanks, guys. I Appreciate your time.

Thanks, Marco.

Thank you. Speakers at this time, we have no other questioners in the queue.

Yes. All right. Well, let me just close by saying thank you to all of our professionals worldwide for their both individual and collective contributions in writing the chapters in our growth story and for the strides that they are making on behalf of the road ahead and working through this Corona virus with our enterprise clients in the weeks ahead. And thanks to all of you on the call for your continued support in confidence in our firm. So, have a great day.

Thank you. Ladies and gentlemen, that concludes the Information Services Group fourth quarter conference call. You may disconnect your phone lines. And thank you for joining us this morning.