Information Services Group Inc (III) 2008 Q2 法說會逐字稿

Good day, everyone and welcome to the Information Services Group second quarter 2008 earnings results conference call. Today's conference is being recorded.

At this time for opening remarks I'd like to turn the conference over to Mr. Barry Holt, please go ahead, sir.

Thank you. Hello. My name is Barry Holt. I lead Communications for Information Services Group. I'd like to wish you a good afternoon and welcome, everyone, to ISG's second quarter 2008 earnings conference call.

I'm joined today by Michael Connors, Chairman and Chief Executive Officer and Frank Martell, Executive Vice President and Chief Financial Officer. Before we begin, I would like to read our 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 statement 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 filed yesterday, August 11 and the risk factors section in ISG's form 10-Q covering second quarter results which will be filed tomorrow on August 13.

You should also read the ISG annual report on form 10-K for the fiscal year ending December 31, 2007, and any other relevant documents including any amendments or supplements to these documents filed with the SEC when they become available. You will be able to obtain free copies of any of ISG's SEC filings on the SEC website, www.SEC.gov.

ISG undertakes no obligations to update or revise any forward-looking statement to reflect subsequent events or circumstances. For the reconciliation of all non-GAAP measures presented to the most closely applicable GAAP measure, please use our current report on form 8-K filed yesterday, August 11.

You will have an opportunity at the end of this presentation to ask questions. And now I would like to turn the call over to Michael Connors, who will be followed by Frank Martell. Mike?

Thank you, Barry. And good afternoon and thank you for joining us. Today Frank Martell and I will recap ISG's second quarter and first half 2008 results and outline the important progress from a business and a financial perspective that ISG has made during the first six months of this year.

We are ahead of our business plan for both revenues and profit growth. For the six months of this year we have achieved record levels of revenues, operating income and EBITDA as we continue to help our clients become more efficient and competitive in a very challenging economic environment. Compared to prior years our revenues in the second quarter were up 20%, first half revenues rose nearly 13%.

Our second quarter and first half EBITDA jumped 62% and 77%, respectively. And our operating income more than doubled for the same periods. And diluted cash earnings per share for the quarter in first half were up threefold.

In recognition of TPI's 19-year track record of delivering quality and great ROI value to its clients, the company was voted the number one sourcing advisory firm in the world according to the closely watched annual survey of senior industry executives published in the June release of the Black Book of Outsourcing.

TPI was also voted the number one provider of ITO as well as HRO advisory services for the past year. As I have stated to you previously, our three-year vision is to build a world class, industry leading information based services company. A key to achieving our vision is sustained best in class margins.

We committed to you to improve on the 2007 EBITDA margins of just under 12% and as you can see we are delivering. We will walk away from low margin revenue even at the expense of some additional top-line growth. We are focusing and rewarding our organization on profitable, higher margin business that we believe the premium TPI brand can support; and the results are clear.

In addition over the past six months we have increased the utilization rate of our advisors and on the pricing side we have realized a higher percentage of our targeted billing rates. We continue to drive productivity in our sales, general and administrative costs, which are falling as a percentage of our revenues. From a geographic perspective, our Europe, Middle East and Africa or EMEA region and Asia Pacific regions, had outstanding growth in the second quarter and the first half.

The sourcing market in these regions has been very robust and our global market leadership allows us to capitalize on this strong client demand. During the past six months we expanded our geographic reach by penetrating deeper into southeast Asia and continued our push into Europe to take advantage of these organic growth opportunities.

For the first six months these regions grew 27% year on year and contributed 44% of ISG's total revenues and that's up from 40% last year. We continue to be the strong market leader in Europe. We have been involved in the most significant client engagements in the region over the past six months.

We were the advisor to The Prudential, with the largest ever commercial outsourcing transaction in the UK. We were the advisor to Royal Dutch Shell on one of the most significant IT and telecom transactions in the past five years in Europe.

We are also working with Deutsche Post, BMW, SAB Miller and others and we continue to see heavy demand for our IT and BPO advisory services across the UK, Germany, the [Benelux] and the Nordics countries. Globally from an industry vertical perspective, demand has been strong for us in financial services, media and telecom, health care, the public sector and the consumer retail and hospitality markets.

For example, in the public sector we continue to work with the state of Georgia in helping them in their ITO area. And in Asia Pacific we recently secured one of our largest ever contract awards in the region from the Australian tax office to provide IT assessment and outsourcing advisory services.

In the Americas region in the second quarter, revenues were equivalent with 2007 levels. For the first six months revenues were up 3%. We are investing in the US and expanding our industry vertical expertise and in developing new products and services. For example, we recently expanded and increased our capabilities in our new governance service business.

We are seeking post contract service agreements with clients to help them mediate cost leakage and achieve the quality and performance from their service provider agreements. We are now beginning to get traction as we signed our first client to a multiyear, multimillion-dollar agreement to provide these services beginning later this year. Post contract management and governance is expected to be an area of predictable revenue growth for us as we move into 2009.

During the quarter we also held our annual client and service provider leadership meetings in the United States and in Europe, with over 400 of our clients and service providers participating in our events. The TPI index continues to be the authoritative voice on the sourcing industry's key developments and trends.

Our data shows that for the first half of 2008, the overall market for sourcing transactions was very healthy. Based on the results of our second quarter TPI index, there were 282 commercial contract awards valued at $25 million or greater during the first six months of this year.

The total contract value or TCV associated with these deals was almost $49 billion, which translates to an annualized contract value or ACV of $9.6 billion. This level of ACV was the highest midyear total ever and was a 36% increase from the first half of 2007. Contributing to this strong performance was the award of a record 24 mega relationship deals, which are defined as having average annual contract values greater than $100 million per year.

For the full year 2008, the TPI index is forecasting growth in the overall sourcing market of nearly 10%. Viewed by geography and similar to 2007, growth in the Americas is forecast in the mid-single-digit range, while Europe and Asia Pacific are predicted to grow by double digits.

We are off to a great start as a public company. To date we continue to see a strong demand for our strategy and assessment work in the US. Many of these we believe will lead to transactions for clients and service providers, but some clients may delay those activities during the back half of this year.

We continue to watch the US economic uncertainty and potential slowdown in client decision making. We have a global footprint and we are taking advantage of the international growth opportunities that are at hand, while managing through the tough US environment in the months ahead. We remain confident that the profitable growth plans that we have charted for our company are well on track.

I will now turn the call over to Frank Martell, who will summarize our financial results for the second quarter and the first half of this year.

Thank you, Mike. And good afternoon, everyone. ISG completed the acquisition of TPI on November 16, 2007. For the periods prior to the acquisition of TPI, ISG was a special purpose acquisition company and therefore had no operations.

To facilitate a full analysis of our financial performance, ISG's presented GAAP financial results, as well as certain non-GAAP information in our earnings release. To ensure appropriate comparability between 2008 and 2007, pro forma results have been prepared and filed for the second quarter and first six months of 2007 on the basis that the acquisition of TPI had occurred on January the first, 2007. I will focus primarily today on ISG's pro forma results.

As Mike mentioned, ISG's revenues were up sharply during the second quarter as our Europe, Middle East, Africa and Asia Pacific regions capitalized on strong market demand for our sourcing advisory services. We continued to increase our operating margins as a result of higher priced realization, better utilization of our billable resources, and leveraging our billable resources as well. In addition, we are carefully managing our SG&A spending levels.

In terms of revenue growth, ISG reported revenues of $50.7 million during the second quarter of 2008. This represents an increase of just over 20% over second quarter 2007 revenues. Fee revenues for the quarter or revenues before client reimbursable expenses, increased 21% year over year to $46.5 million. For the first half of this year, ISG reported revenues of 96.2 million, up 10.7 million or 13% from the first half of 2007. Fee revenues during this period also increased 13% year on year to 88.5 million.

Revenues from international operations were up 27% from pro forma first half 2007 level driven by strong client demands across all the company's major geographies and industry verticals. The first half 2008 revenues in the Americas were up 3.2%, compared to the same prior year period. A global all employee meeting held during the second quarter of 2007 was not repeated during 2008, benefiting year on year comparatives.

ISG ended the second quarter with 200 active client engagements, which is up 10% from 182 for the same prior year period. Year to date ISG has worked with a total of 443 clients up 30% from 2007. Importantly, approximately 78% of our year-to-date engagements came from existing or former clients, demonstrating a continued high level of client satisfaction and loyalty.

In terms of profitability and margin rates, for the second quarter and first half of this year ISG increased EBITDA and operating margins at rates significantly in excess of revenue growth. For the first quarter of 2008 earnings before interest, taxes, depreciation and amortization or EBITDA, which is a non-GAAP measure, totaled 8.1 million, an increase of 62% from pro forma second quarter 2007. EBITDA margins as expressed as a percentage of fee revenue, increased 440 basis points to 17.4% in the second quarter of 2008 from 13% in 2007.

First half 2008 EBITDA totaled $15.1 million, an increase of approximately 77% from pro forma first half 2007 EBITDA of 8.5 million. First half EBITDA margins increased 620 basis points to 17% from 10.8% in 2007. Trailing 12 months EBITDA at June 30, 2008 totaled 26.7 million, including noncash stock compensation of 1.4 million.

Operating income for the second quarter of 2008 was up 148% from pro forma second quarter 2007 totals and operating income for the first half of 2008 was 9.5 million, up 164%. ISG's reported operating income for the first six months which ended June 30, 2008, was up ten million from a reported operating loss of 500,000 during the same prior year period. The significant increases in both operating income and EBITDA for the second quarter and first half of 2008, resulted primarily from revenue growth, higher gross margins and tight management of general and administrative expenses partially offset by higher public company-related expenses.

Noncash stock based compensation of 1.4 million for the first six months of 2008 had no 2007 counterpart. Diluted cash earnings per share for the second quarter of 2008 was $0.17 compared to a pro forma diluted cash earnings per share of $0.05 for the second quarter of 2007. Diluted cash earnings per share for the first half of 2008 totaled $0.31 compared with pro forma dilute cash earnings per share of $0.10 for 2007. The more than threefold increase in diluted cash earnings per share was primarily attributable to sharply higher revenues and EBITDA margins and the impact of ISG's ongoing share repurchase program, offset partially by higher income taxes.

Trailing 12months diluted cash earnings per share at June 30, 2008 was $0.45. Pro forma cash earnings are defined as net income plus noncash amortization of intangible assets and stock based compensation. It is a non-GAAP measure that ISG believes provides useful information to our investors by excluding certain noncash items, which we believe are not indicative of ISG's core operations.

Finally, ISG continues to improve our already strong liquidity position to support the implementation of our three-year business plan. Cash and cash equivalents aggregated 48.5 million at June 30, a net increase of 1.3 million from year-end 2007. This increase was primarily attributable to improved operating results, primarily offset by higher capital expenditures, term loan interest and principal repayments, severance and other one-time BCP-related expenses and the repurchase of ISG securities.

ISG's total debt outstanding at June 30 totaled $94.5 million. As Mike mentioned, our second quarter and first half performance were ahead of our internal business plans for both revenue and profit margins. We continue to invest in the future and focus on transforming our cost base into a more flexible and leveraged model with higher utilization rates, enhanced price realization and tight management of SG&A spending. We believe this focus will drive revenue growth and future business expansion at best in class margins.

Thanks very much for your time today. Mike will now share some concluding remarks before we go to Q&A.

Okay, thanks, Frank. ISG delivered double-digit revenue growth with record margins in the first half of 2008. The overall sourcing market has grown strongly over the past six months, particularly in Europe.

ISG's global market leadership and geographic footprint, we believe have positioned us to support our clients' needs to drive efficiencies in their key technology and business processes in the face of one of the most challenging macro economic climates in recent memory. ISG remains on track to reach our objective to build a high growth industry leading information based services company.

Our focus remains on profitable revenue growth and achieving best in class performance levels and it's yielding significant margin improvements and allowing us to support an increased level of investments in new products and services, which we believe will underpen our continued organic growth and the achievement of our business plan goals. Thanks again very much for calling in this afternoon and now let me turn the session over to our operator for any questions that you may have.

Thank you. (OPERATOR INSTRUCTIONS) We'll go first to Tim Fox with Deutsche Bank.

Hi, thanks, good afternoon.

Good afternoon, Tim.

Congratulations on a strong quarter. Great performance on the EBITDA line. A couple of housekeeping questions.

First for Frank. The tax rate in the quarter was just a hair below where we were modeling. Can you talk a little bit about where that tax rate may go from a full-year perspective and what's driving that? It looks like it's going to bounce around a bit here quarter to quarter.

Yes, Tim. We expect the tax rate will be in the 40% range for the full year. We have a program that we launched to restructure the legal structure of the company, but that will really not have a significant benefit until we get into the latter part of '09. So we continue the tax rate to be and it's driven primarily by the mix of where the income is coming from.

Okay. Great. That's helpful. Second question just on currency. I think on a net basis, FX doesn't really affect the overall business but just from a top-line perspective, how much uplift did you get in the quarter from currency?

The FX impact for second quarter was approximately 1.7 percentage points.

Okay.

And year -- from a year-to-date perspective that's about 1.4 percentage points.

Okay. Actually fairly immaterial. And you mentioned utilization a few times. Are you going to be providing quarterly update on where utilization stands at this point?

Yes, I can give you guys -- we're looking at it from kind of a trailing 12 months perspective.

Okay.

And so for the first half of the year that utilization rate is at -- stands at 73.8%.

Okay.

And year -- for the 12 months ended December 31, '07, that number was 72.4.

Okay. Great. And from an SG&A productivity perspective, just in broad terms, do you see that the overall percentage continuing to drop as a percentage of revenue for the foreseeable future and is that just really from keeping costs flattish to growing just modestly? And revenue growth obviously outpacing that?

Yes, we as a general philosophy, we'll try to keep the number trending down because we believe in an SG&A productivity target which we have set in our annual planning. We should -- you should see that number tick down. We think in at least for the next kind of six to 12 months, and I would expect probably eventually it will level off.

Okay. Great. That's helpful. Maybe, Mike, just talk a little bit about the environment. Obviously Europe's been a bright spot and other international areas.

Any concern at all given some of the recent discussion around Europe possibly weakening the UK economy, possibly weakening? Or do you see this more of a secular trend outside the US where sourcing is just becoming a broader accepted strategy for many companies?

Yes. No, thanks, Tim. I think we do see some of those reports about Europe, et cetera. We don't see it and in fact, I think you could probably split up those industry kind of noise level into what would be considered more discretionary by a client, and what might be more kind of mainstream.

And we think of things like infrastructure, et cetera, that tends to be more mainstream and we see a lot of the work around infrastructure, around data warehousing, around contract management, outsourcing data centers, and you may see some of that discretionary from clients on ADM or something, but we don't see any of that. We see quite a strong demand and again we think that there are a lot of areas that clients are looking at. It's still relatively newer in Europe.

It's continuing to be utilized as a great strategy for clients to improve their competitiveness. So from our standpoint, we see the demand pretty robust. I think you can also look at the record kind of 24 mega relationships that have occurred during kind of the first half of the year and those are contracts worth 100 million or more and a majority of those occurred over in Europe. So that should give you an idea of kind of the robustness that still, we think is still quite alive there.

Okay. Great. And just on North America, you mentioned some of the up front and the assessment work remains fairly robust but that there may be some -- a little bit of pushout, decision making delays on the actual implementation.

Short of giving specific guidance on America's growth, would it be unrealistic to expect kind of flattish performance out of the US for the latter half of this year just given the macro pressures?

I think, I would look at it kind of couple -- a couple of different ways here. Number one is, our strategy and assessment work which is normally what we are asked for initially to come in, take a good look at their businesses, take a good look at what their current cost structure is relative to their peers, relative to the industry. That work is continuing because everyone seems to believe that they need to understand where their cost structure is now so that they can take actions if they want.

We have not seen the slowdown. I was only teeing up the fact that our view is that we could envision clients during the next quarter or two beginning to slow and beginning not to make the decisions that they would normally make because of what's happening in the US economy. Which means they may push out the transactions a quarter or two.

But I think when you look at the TPI index and you look at our business, I think kind of the mid single digits in the Americas is something that is a reasonable expectation and you couple that with the robust growth in the international markets and you've got a pretty live business.

Okay. Great. That's helpful and maybe lastly just looking at the -- from an ISG perspective and the M&A pipeline that you're evaluating. Anything to report there as far as interesting possible transactions that are out there and what specific area and how are valuations looking these days given where the market has gone recently?

Yes, good question, Tim. Well, we're very active. Again, we are focusing in three areas: Areas of increasing the capabilities of TPI and whether that's graphically or industry verticals or more size or scale.

The second area is anything that relates to research, we believe that this is a key area for our continued development and thirdly as we talked about as the whole area of data and additional information to create some syndicated or annuity type products.

So those are the three focused channels that we continue to look at. We continue to have dialogue and discussions. Nothing to report today, but we are very active.

Okay. Great. And actually I'm going to ask one last one if I may.

Sure.

Just looking at the third quarter and maybe even the fourth quarter, just from a seasonality perspective, and given the strong second quarter results. Is the third quarter in your view going to be seasonally down or just talk a little bit about what the trends may look like given the election cycle coming up and some of the other headwinds. How should we think about, at least the third quarter from a sequential perspective and, is that a tough compare per se over the '07 results?

Yes, Tim, this is Frank. A couple of things on the third quarter that we've, you should consider. One is that, obviously Europeans in particular have a pretty heavy vacation in the August, end of July, August time frame. So there is some -- there is some, some impact of that.

We also, though you may -- you probably don't recall, but last year we had some pausing in the US market in the second quarter. There was some timing and we had a big third quarter relatively speaking in the US. So we'll look at -- from a comparative perspective, we'll have that as well in the mix. We expect, really fundamentally the same types of trends to continue, very strong European and Asia Pacific result and a kind of a mid-single-digit US result cutting through the first nine months of the year or so.

There is some seasonality, some vacation pressure and some comparative -- strong comparative last year. So we wouldn't necessarily see quite the 20% rate of growth that we have in the second quarter, but it should be fairly healthy.

Great. That's it for me. Congrats again.

Thanks, Tim.

Thanks.

(OPERATOR INSTRUCTIONS) We'll go next to [John Walfison with Walfison and Company].

Yes. Thank you for taking the call. Had a couple of questions. I guess a little bit different framework. In terms of achieving what you're looking to do over the next three years, it seems to me you need to grow your team substantially.

Can you talk about what the hiring rate was in the quarter and what the turnover rates are and also how you plan to make those hires without provoking higher costs and other strains on the system?

Okay. Hi, John. This is Frank. Some kind of end period statistics on the headcount numbers. We ended from a billable perspective, we ended up with 365 people at the end of June. That's up slightly from the end of the year we had actually 360 at the end of the year.

So, we are growing and there's a mix. We're growing, obviously, very quickly internationally and less so in the US where the revenue growth is less. We have a very aggressive plan to leverage the organization more from a -- kind of a pyramid perspective.

So we will be very much adding people at the lower ends of the pyramid and not necessarily at the higher end of the pyramid. So we have those factors to consider. So we don't believe that there will be a tremendous inflation necessary impact of trying to hire these people.

Obviously we have a great leadership group already in the company that we can leverage even more, so as we go forward. The turnover rate is pretty low for the company. It's in the -- from a voluntary perspective, it's in the single digits.

So -- and we haven't really seen that, that change materially and that's been the history of TPI for a long, long time. So we don't foresee that necessarily increasing significantly either.

Good. Then the second question I had was you talked about moving closer to your targeted billing rate in the quarter, which is great.

As you endeavor to move closer to the targeted billing rate, does sort of the mix and the terms of the engagements change? Are there risk aspects in some of the new business you're writing that we should be aware of or other factors which, could come up and be important in the future?

No. I think there's -- there's really no change, no terms and conditions or, or that type of thing going on. It's a pretty traditional time and material billing structure.

And our rates I think are -- I think we're getting some traction on the rates from, from a focused perspective and also I think from a process perspective. We're looking at when we employ billing rate changes and making sure that we do that in kind of a more consistent global way than perhaps in the past.

Okay. Good and then the last question I had. You referred to wanting to change your cost structure, I think the term you used was maybe toward more variable and flexible model. Can you talk a little bit about what that means and how you expect to get there and what kind of a time frame we should look to see that in place?

Yes. I think the biggest way, we're looking at the biggest change is really, traditionally TPI has had a -- a great leadership structure and has tended to be very senior resource driven. But as we look, as the markets change and we want to grow, we want to make sure that we bring in some more leveraged people up and kind of leverage the resource base a little bit better.

So, for example, in the last couple of months we have actually started up a financial analysis hub where we have a bunch of folks in Detroit who do financial analysis in a central location where we can leverage those guys aggressively. We also have a fairly decent size operation in Bangalore, which we have been extending very aggressively and of course we'll utilize those folks on multiple client engagements.

So those are the big -- the big moving parts, but in addition from our advisor perspective, we'll be looking to leverage the managerial capabilities of the senior folks and bring more junior folks in to do more client engagements.

Okay. Good. That's very helpful and good quarter. I appreciate it. Thanks.

Thanks very much, John.

Ladies and gentlemen we have one question in the queue but we do want to give everyone an opportunity. (OPERATOR INSTRUCTIONS) We'll go next to [Vikas Lunia with Carlson Capital].

Hi, guys.

Hi.

Great quarter.

How are you?

Good great quarter. I had a few just quick questions. You mentioned the TPI index is forecasting mid-single-digit growth in the Americas. I just want to make sure I understand how that would translate to kind of order of magnitude revenue growths for TPI itself given that those aren't always 100% correlated? Is that -- should I take that to mean that order of magnitude -- your Americas business will probably grow roughly around mid-single-digit growth?

I think a couple of things to look at. The index is for the industry overall and it's to give -- it's to give kind of a good understanding of what the developments and the trends are in the space in which we operate in.

They don't necessarily to your point correlate one way or the other for the TPI -- to the TPI business. I think what we have said is on an aggregate basis we are targeting to achieve as close to a double-digit revenue growth as we can. The caveat I will tell you is what we have stated before, which is our number one priority is profitable growth.

And we have set up our structures throughout the world to reward profitability and to reward growth that's profitable and not to take low margin business. So we will walk away, we have walked away from low margin business if it means that it will jeopardize what we are trying to do which is to keep the TPI brand at a premium level, so that we can be able to provide our services at rates that we think are appropriate for the brand and the expertise that we bring.

So that's the target on an aggregate. We haven't broken it down by any particular region, [Vikas]. But that's kind of consistent with what we have said.

I guess just generally, though, if I look at the index growth, which we have the very helpful calls every quarter. Is there kind of some way to think about how correlated you're going to be to that index growth or will you generally grow faster or slower than the index?

I don't really know how to answer that other than the way I -- the way I did. I think we look at the Americas as probably growing in kind of the mid single digits and double digits elsewhere and on an aggregate basis achieving that or near double-digit growth.

That's what we're targeting. That's what we're building the business off of. So I don't know if that answers it directly, but that's how we look at it.

Okay. And then the too thing, you had mentioned on seasonality Q3, obviously have a lot of people taking vacation, particularly in Europe. Is there just in terms of margins, should we think about seasonality as well as is there kind of some pattern between the four quarters?

Yes. I think, no, [Vikas] this is Frank. I think you should see the margins, we've had really, really good progress in the margins. And we had some fairly high utilization numbers in some of the international units and so although that exact margin rate may not continue, it shouldn't be far off. So I think you won't see dramatic spikes in margin rates in the third and the fourth quarter.

In general just so we kind of have it t like I'm assuming kind of Q1 and Q3 are your lower margin quarters but maybe I got it backwards.

Yes, typically Q3 we have a little bit of vacation, Q -- it's really not -- for us we have -- we're kind of vacation and holiday driven because of the billable nature of the company. So typically the summertime, kind of July, August, is a little bit slower and then kind of the -- the December, January time period with some intermittent holidays.

So I would say, though, that from a margin rate perspective and a total EBITDA perspective, second quarter is big for us, and then the latter part of the third quarter and early part of fourth quarter tend to be our strong months as well.

So it doesn't neatly fall into the quarterly pattern, but those are kind of the months you can think of, the second quarter kind of the very last month of the first quarter, second quarter, end of the third quarter and the early fourth quarter are really our stronger months.

Vikas, this is Mike, just to remind you. We committed to increasing our EBITDA margins by at least 500 basis points from the 2007 numbers, which as you'll recall was under 12% over this,planning period that we have been talking about. So keep in mind that we're going to continue to invest in the business.

We're looking at new products, services and businesses, organically. So the combination and the robustness that we've been able to come out of the chutes in is strong, it's good. But I also want to just keep in mind what we committed to and what we plan to do, which is to continue to grow the business as much organically as possible and that means we got to continue to invest.

No, no, your margin performance has obviously been spectacular and that's kind of one of the reasons I wanted to just make sure I understood that, what seasonal impact if there was any in that. On that 500 basis points, Mike, could you remind me, is that on C revenue or total revenue? Like the margin period.

That was on total revenue.

On total revenue. Well, great quarter. And thanks for taking the questions.

Yes. Thanks very much.

(OPERATOR INSTRUCTIONS) We'll pause a moment. It appears we have no further questions at this time. For closing remarks, I'd like to turn the conference over to Mike Connors.

Well thanks all very much. Just in closing here, we continue to deliver strong results on almost every level in our first six months as a public operating company.

I think in these challenging economic times our clients are looking to TPI and ISG to improve their efficiency and competitiveness. And I think we're uniquely positioned to support our clients with the global footprint and a broad set of products and services that we have for the industry.

Let me just close by thanking our more than 460 professionals around the world for a terrific first half of the year and their dedication to delivering the highest possible value to our clients. And to thank you, all of our investors for your continued trust and confidence and support in our team.

So have a great day and, again, thanks for calling in.

Ladies and gentlemen, this does conclude today's teleconference. We appreciate your participation. With you may disconnect your phone lines at this time.