Information Services Group Inc (III) 2017 Q2 法說會逐字稿

Good day, and welcome to the Information Services Group's Second Quarter 2017 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, 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, everyone. My name is Barry Holt. I'm a senior communications executive at ISG. I'd like to welcome everyone to ISG's second 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 statement contained in our Form 8-K, which was furnished this morning to the SEC, and the Risk Factors section on 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, 2016, 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 statement 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 for greater transparency of key measures 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 this morning 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.

Today, we will review our second quarter and first half results, brief you on our key operating and client highlights and update you on our full year forecast.

We continue to make great progress establishing ISG as a significant digital technology partner to enterprises globally. We achieved record revenues in the second quarter, a record number of clients served in the quarter and an increasing demand momentum for our digital services as we enter the second half.

Let me review some key metrics that reflect this momentum.

Q2 revenues were a record $68 million. We served 448 unique clients in the quarter, and that's a record number for ISG, up 19% from a year ago, including 2 new big brands, Google and McDonald's, both of whom are working with us on digital services.

ISG recurring revenues were $18 million during Q2. That's up 20% from a year ago. To remind you, we are targeting $100 million of recurring revenues within 3 years and forecasting approximately $70 million in 2017. With $37 million in the first half, we are well on our way to reaching our goals.

ISG Digital Services continues to expand and now represents 35% of our overall revenue and climbing. There's especially strong demand for our Robotic Process Automation, or RPA, services among banking, insurance and retail clients in the U.S. and the U.K. in particular. As a result of this increasing market appetite, we increased our spending in digital services by approximately $1 million during the quarter, investing in more people, marketing, client development and further product development.

ISG Digital Services should have a good runway for growth over the immediate term based on both our building pipeline but also industry growth projections, including the following. Number one, in an ISG recent survey of more than 500 business and IT leaders, we found that overall investment in automation technologies, including Robotic Process Automation, or RPA, autonomics and machine learning is expected to double in the next 2 years. Number two, 75% of those who responded to our survey indicate that automation and artificial intelligence, or AI, will be critical to their ability to deliver products and services competitively. Number three, 2/3 say such technologies were required to fend off competition from digital disruptors. From a functional perspective, nearly 70% say IT will be most impacted by automation and AI in the next 2 years. Number four, nearly 60% believe autonomics will double IT productivity by 2020. Number five, other key areas of impact include finance and accounting, where more than 50% say RPA will automate more than half of their F&A processes by 2020. And number six, an earlier ISG report on HR technology show that more than half of all enterprises will rely on cloud-based or hybrid solutions for their HR systems by 2020, and that's more than double the number that do today.

As I mentioned at the outset, our Q2 revenues were $68 million, up 15% versus the prior year in constant currency. As is customary for ISG, I'll focus on constant currency growth during this call.

We had strong revenue growth in the Americas, up 26%, and in EMEA, up 6%, with Asia Pacific down $600,000.

For the first half, we achieved revenues of $135 million, up 24%.

Q2 adjusted EBITDA of $8 million was up 14% versus last year, and first half EBITDA of $15 million was up 45%.

Our cash balance at quarter-end was $25.5 million, up 58% from the prior year.

Turning to our regions.

In the Americas, our 26% growth in the second quarter was fueled by strong demand for digital services, including RPA, managed services, our new network services and our growing recurring revenue services, including research.

In our industry segments, we saw especially good growth during the quarter in our insurance, manufacturing, technology and retail verticals. Key client engagements in the quarter included Xylem, Exelon, the Bank of New York, Transamerica, Staples, the University of Oklahoma and, as previously mentioned, Google and McDonald's.

Turning to Europe. Revenues were up 6% in the quarter, led by double-digit growth in the DACH region, with especially strong growth in Germany. Our U.K. operation is stable and appears to be moving past the Brexit uncertainty of last year.

During Q2, U.K. revenues were up about $500,000 sequentially and essentially flat from a year ago.

In our industry segments, we saw especially good growth in EMEA during the quarter in manufacturing, technology and retail verticals. Key client engagements included Allianz, [Krosineus], Shell, E.ON, BNP Paribas, BMW and Mercer.

We also had very good news out of our long-time client, the U.K. Ministry of Defence or MOD. During the quarter, we closed a $3.2 million new engagement that represents our first ISG-only direct relationship with MOD. This new agreement comes at an opportune time as our current contract supporting MOD as part of a 3-company consortium is winding down by the end of this year.

Also in our public sector business, we recently signed a multiyear, multi-million dollar contract to provide Benchmarking-as-a-Service, we call it BaaS, to the Swiss government. The engagements include benchmarking all of their internal and external IT and communications services providers against the market.

In Asia Pacific, our second quarter revenues were down $600,000 versus the prior year but with good growth in the technology and retail verticals. Key clients in the region included Optus, which is the second largest telecom company in Australia, Westpac, the Australian Department of Immigration and Border Protection, Rio Tinto and BHP.

In our continuing drive for recurring revenues, we generated over $18 million of these more predictable revenue streams in the second quarter, up 20% year-over-year. For the first half then, recurring revenues were up 29%. And as previously mentioned, our new target is to achieve $100 million recurring revenues in the next 3 years.

Now turning to our full year guidance.

We remain optimistic about 2017 and our ability to continue to advance our long-term strategy. We are reaffirming our full year revenue guidance of $270 million to $290 million or a growth of approximately 25% to 34% based on a number of factors, including the revenue momentum we experienced in the first half, with revenues up 41% in the Americas and 8% in Europe, the growing demand for our digital services and the growth of our recurring revenue streams.

As mentioned earlier, we have increased our investment in digital services, including RPA based on growing market demand. As a result, we are updating our full year EBITDA guidance slightly to $32 million to $35 million or growth of approximately 60% to 75% versus the prior year.

Our digital services strategy is working. For example, in the last 90 days, we have been awarded the Best Practice and Implementation Partner in EMEA by Blue Prism, a leading RPA software firm, beating out a field of 42 advisers for this honor. This came after being named a certified RPA business partner of Blue Prism in the first quarter, one of only 6 firms in the world to earn this distinction.

We were also named a Crown Commercial Service supplier to the U.K. government for cloud and digital services. And with HR tech growing in importance for our clients, we were honored as the 2017 North American Thought Leader of the Year by HRO Today, the second consecutive year our firm has been recognized.

We continue to be on the leading edge of industry change, with more than 50 human capital management SaaS engagements to our credit. Naturally, we will remain cognizant of broader macroeconomic conditions as we look ahead to the second half of the year.

So with that, let me turn the call over to David Berger, who will summarize our financial results.

Thanks, Mike, and good morning, everyone.

Second quarter revenues were $68 million compared with $60.4 million in the prior year. This was an increase of 15% in constant currency and 13% on a reported basis. Currency negatively impacted reported revenues by almost 3% or $1.2 million.

Revenues were $40 million in the Americas, up 26% from the same period in 2016; $21.5 million in Europe, up 6%; and $6.6 million in Asia Pacific, down $600,000, with growth in constant currency.

Second quarter 2017 adjusted EBITDA was $8 million. This compared with $7 million in last year's second quarter. The result was driven by revenue growth, partially offset by increased investment in digital services.

Adjusted net income for the second quarter was $3.5 million or $0.08 per share on a diluted basis compared with adjusted net income of $3.5 million or $0.09 per share on a diluted basis in the prior year's second quarter.

We reported operating income of $500,000 for the second quarter of 2017 compared with operating income of $3.2 million in the second quarter of 2016. Included in the second quarter 2017 operating income were: $1.9 million in additional depreciation and amortization expense, $800,000 in acquisition-related costs and $1 million in severance and integration expenses.

The net loss for the second quarter of 2017 was $300,000 compared with net income of $1.7 million in the second quarter of 2016.

Reported fully diluted loss per share of $0.01 compared with fully diluted income per share of $0.04 for the same period in 2016.

I want to remind you that the Alsbridge acquisition brought with it 2 revenue streams requiring different revenue recognition considerations. In network services, most engagements are contingency based. Revenues are determined based on a percentage of the ultimate level of savings. Revenues are recorded when the work is completed and the savings and resulting revenues can be determined. Costs to deliver, however, are recognized when incurred, so there is usually a misalignment of costs and revenue in this business line. Therefore, the timing of completing these engagements can have an impact on quarterly revenues.

With RPA, we enter into arrangements for the sale of automation software license and related delivery of consulting services at the same time or within close proximity to one another. We record revenue for these engagements in a straight-line manner, commencing after installation is complete over the remaining term of a license. The costs, on the other hand, like network contingency engagements, are recorded as incurred, and so there can be a misalignment of costs and revenue recognition.

The timing of completing the installation can also have an impact on quarterly revenues.

Q2 revenues would have been stronger if not for the impact of these revenue recognition rules.

Utilization for the quarter was approximately 67%, consistent with Q1.

Quarter-end headcount was 1,238, with a significant increase in digital service employees, offset by reductions as part of our integration 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 first half was $1.7 million. And during the first half, we invested $1.5 million in capital expenditures and repurchased $2.7 million in shares.

On the balance sheet, we ended the quarter with $25.5 million in cash and total debt outstanding of $122.5 million. Our average borrowing rate for the quarter was 4.6%.

And we had 43.3 million shares outstanding as of July 28.

Mike will now share concluding remarks before we go to Q&A.

Thank you, David. Let me summarize.

We had a very strong first half, putting us solidly on a path to achieving a step change in our financials this year. We had record second quarter revenue, a record number of clients served and continued growth in digital services revenue, now representing 35% of our total, up from 30%. And recurring revenues reached $37 million in the first half, up 29%. EBITDA margins continue to expand, now at 11.8%, up over 100 basis points versus Q1. Our cash balance is strong at $25.5 million, and we've had a smooth integration of Alsbridge into ISG.

As always, we are focused on creating shareholder value for the long term. I'm optimistic about our 2017 prospects and our ability to progress our long-term strategy.

Though we have had a nice move in our market cap this year, we believe the equity market will ultimately realize the significant value we are creating and reward us accordingly.

Thanks very much for calling in this morning, and now let me turn the session over to our operator for questions.

(Operator Instructions) We'll take our first question from Sarkis Sherbetchyan with B. Riley & Co.

So first question here relates to the incremental spend that you did for the quarter to beef up the digital services advisory business. Was that about $1 million, you said?

Yes.

And was that recognized in just the SG&A line? Or was that in direct costs and expenses?

There's a little in both.

Okay. Do you mind giving us the breakout of that?

You basically split it between the 2.

Okay. And do you expect that to recur kind of going forward? Or was this really just kind of a onetime spend to beef it up?

Yes, to beef it up, Sarkis. We've seen a -- I mean, we're -- this RPA area, in particular, robotics is brand new for us and really the market. And I think I gave you some of the key metrics that we have been looking at, and then we are anticipating that this will continue to grow, so we decided to go ahead and add it in Q2. But I think it's a -- at this point, for 2017 anyway, I think it's just a onetime event.

Got it. And so that's really what reflects the modification to the adjusted EBITDA guidance, is that correct?

Yes, that's the only thing.

Got it. Just moving on to the recurring revenue number. I think you mentioned $18 million for the quarter, and that's, what, about $37 million for the first half. And in your comments, did you say you expect $70 million for the year?

Yes, that our -- I think we gave that earlier in the year, that we estimated that recurring would be approximately $70 million, 7, 0, for the year, up from -- I think it was around $60 million last year.

Is there anything going on in the back half year that we should be aware of either from recurring revenues in aggregate that is kind of tempering off or is that just kind of positioning it conservatively?

I would -- I think it's the latter, but we also have one public sector contract in West Virginia that ended in the second quarter, so I would say that we took that into consideration.

We'll take our next question from Vincent Colicchio with Barrington Research.

Couple questions. So the U.K., you said it stabilized, flat year-over-year. You had a nice win with the defense department. And I'm just curious, a couple of quarters ago, you said there was a bunch of projects that were delayed and you still had guys on-site, so you expected them to eventually come back. What are your thoughts on those projects? Have some of them gone away? Or will they still -- or do you still expect them to come back?

Yes. So I think I mentioned that last year, we made the decision to leave most, not all, but most of the people in place despite the fall-off with Brexit. I think that's helped us stabilize during the first half. And knock on wood, even though the full year we've assumed roughly a flat U.K. kind of environment or a stable U.K. environment, the pipeline, especially with digital, in the U.K. looks promising. So we think that some of those projects will show fruit in revenue growth during the back half. But we're very cautious there.

Okay. And then you mentioned -- I think you said 35% digital contribution in the quarter. I'm curious, you had cited some important data points in terms of growth prospects for robotics and AI. I'm curious, order of magnitude perhaps, what portion of your digital is robotics and AI today? And how do you expect it to change over time?

Yes. We don't break that out, although I will say we communicated earlier in the year that we expected robotics to be $10 million-plus of our revenue. And it is tracking at a higher rate than that at the moment.

Okay. And then the network carrier sourcing business you acquired, is that business growing organically? And do you -- and how large is that as a percentage of revenue?

So the 2 what I would call revenue recognition items that are different this year, which is network and RPA, as David outlined, together represent approximately 15% of our revenue. So if that helps. But we don't break out robotics that much because of competitors that are out in the market, but that will give you some guidance to just give you a feel between the 2, that it's roughly 15%.

And then after you did the acquisition of Alsbridge, you guys said that there's opportunities to expand your research business. I'm curious of the growth in recurring revenue, it was -- if research was an important contributor to that.

Yes, research is a significant contributor, and we think it will be for the full year. It's around -- we try to focus it around emerging technologies around cloud, digital, security, big data, AI, robotics. And those are all hot topics. We try to kind of create a niche for ourselves. We don't compete with the research of a Gartner or a Forrester. We try to put it into the areas that we have experience and expertise. And for the most part, it is real live engagement data that others cannot have. And so that's where we've been focusing it, and it's served us quite well.

We'll take our next question from Allen Klee with Sidoti.

For the revenue that you highlighted as a timing issue, how long does it take until it balances out?

Well, we think if you'll notice, we have reaffirmed the full year revenue, so we expect it to be completed this year. One thing to note, Allen, and not necessarily for this call, but come January 1, the accounting for such items changes again under the new accounting rules. So that'll be a different story next year. But our view for 2017 is it's simply a matter of we've got to get certain outcomes to occur before we can actually recognize the revenue, but we're recognizing the expense. But we hope that, that flows through for the full year, and thus our full year guidance on revenue remains the same.

Okay, great. And then for other segments of the former Alsbridge, beside, well, like network carrier, the non-robotic-type segments, could you give a comment on how they performed?

Well, we fully integrated the business. So the outsourcing, our network, our software platform businesses, we're now all in going to market as one. We've integrated the leadership, the teams. We've been very pleased with the entire integration with Alsbridge, both on a people and on a business. We are cross-selling now into client base. You saw the client numbers for the quarter. They were off the charts for us. So we feel very good about all aspects of it, including, by the way, I'll add, including the cost takeout that we've also been in the process of accomplishing as well.

Okay. So to follow up on that, I think when you announced the deal, there was projected to be around $7 million of synergies. Where do we stand on that?

Well, we said, yes, $17 million -- $7 million over an 18-month period, and we're well on our way to achieving that number at this point.

Okay. And then can you just remind us of how we should think about any seasonality in third quarter and fourth quarter?

Well, I mean, historically, second quarter has been our high this year. We don't think there'll be a major drop-off in the third quarter of this year. There is -- there are vacations in Europe during the third quarter, particularly in France, that do impact the third quarter revenue.

We'll take our next question from Ben Klieve with NOBLE Capital Markets.

Couple questions for you guys regarding Europe. In the past, you talked about the traction RPA was making in Europe and your customers' kind of willingness to make investments in the higher-return, faster-payback period investments in the technology, but -- or kind of the bigger investments with longer payback periods were kind of delayed by the kind of post-Brexit climate. I guess I'm wondering if you could just kind of update us on your take on that. Is that still the case? Did you notice that your clients are beginning to increase their willingness to make those larger investments? How do you see that playing out in first half?

Yes, no, good questions. Certainly, on the digital front, including RPA, because RPA is a bit quicker, meaning it's months, not necessarily years on ROI for clients, that has taken hold in the U.K. in particular because, as you know, and I'm sure you've been reading all the Brexit decisioning is beginning to -- begin to unfold here, I think, in the next 12 months or so as clients are beginning to decide what operations they want to keep in the U.K., what operations need to go elsewhere. So I think you'll see -- we think we will see toward the second half of the year and into 2018 that some of the larger projects will take hold and then that should bode well for revenue growth for that part of the world. So we're cautious about this, but we're optimistic that we will see this sooner rather than later based on some of the client behavior that we see going on right now.

Okay. And kind of along that -- the same line, I guess, I noticed, especially in kind of the May, June time frame, a lot of banks really started to make their plans, I don't want to say official, but made their plans more public without shifting away from London towards Frankfurt and Dublin. And I guess I'm wondering, have you noticed any notable business improvement in financial vertical in Europe?

Yes, we have. Actually, it's a very good observation. The financial services sector, banking in particular, but I would put insurance in there as well, in the U.K. is quite active at the moment. We are in a number of the top banks, beginning initial work with them in the U.K. So yes, we do see increased activity in the financial services, banking and insurance in particular.

Okay, because that -- if I remember correctly, that wasn't one of the verticals that you highlighted in your prepared remarks, but you're seeing that that's -- that maybe wasn't a revenue driver in the second quarter, but you are seeing business pickup in that space, correct?

Yes, I would see that picking up in the second half based on the current activity level, but it did not have any material impact for us in Q2. But we -- with the activity level we are involved in now, I could see that happening in the back half.

Okay, perfect. And then kind of transitioning to digital services. I'm trying to gauge the organic versus inorganic improvement. And I know you won't break that down, but I'm wondering on a pro forma basis when you acquired Alsbridge, can you remind us of what percentage of the revenues fell into what you would consider your digital service offerings?

Very little. It would -- I would call it quite immaterial.

Okay, perfect. And then...

But...

Oh, sorry, go ahead.

Well, I was just going to say, Ben, the advantage we have, though, is by integrating Alsbridge into the ISG totality, we're able now to access a broader client base to sell the broader portfolio. So from that perspective, it's been a nice leverage point. But in terms of revenues, it was really immaterial.

Got it. Okay. And then final question regarding the disconnect between revenue and cost recognition from Alsbridge, wondering if that's the same on both a cash and a GAAP basis? Or cash collection a bit more favorable?

No, it doesn't have an impact on cash. I mean, we continue to bill the client as the work is incurred. So it's just an accounting impact from the revenue recognition.

And we'll take our next question from Marco Rodriguez with Stonegate Capital.

A few housekeeping items here. What was cash flow from operations for the year-to-date period?

Cash flow from operations for the year-to-date period was $1.7 million.

And what is the deferred revenue balance on the balance sheet right now?

I think $9.2 million.

$9.2 million, got it. Okay. And then I was wondering if maybe you can talk a little bit more -- a little more color here on the Americas. Revenues sequentially declined where I think they're normally -- they're up a bit here sequentially. Can you just provide a little color there?

Yes, well, the Americas continues to lead our growth. As we indicated, the revenue growth was driven by continued growth in RPA and digital services. Network services, continued growth as well. Managed services and research, also obviously components of the growth in the Americas. So the Americas had a strong quarter, year-to-year growth versus the prior year.

So I guess I was asking more sequentially, it was down versus Q1. Was that just a factor of maybe Q1 was a little bit heavier than you thought it was going to be, stronger than you thought it was going to be? Or were these some issues with this revenue recognition that really kind of impacted Q2 versus Q1 revenue?

No. I mean, there are impacts, yes, definitely in Q2 from the revenue recognition that, again, we have to -- basically, in the RPA area, we have to complete an implementation before we could start the revenue recognition. In network, you have to -- we have to have an agreed upon contract with our clients and the telecom providers before we could actually record all the revenue from that engagement. So there is some up and down in the recording of revenue in that sector.

So how should we think about the seasonality then, I guess, going forward with these revenue recognition practices, which are obviously not impacting your cash flows? But just kind of the seasonality aspect you had historically, how should we think about that going forward with these new impacts?

Well, yes, we -- our -- we did $135 million for the first half. We've said we were going to record -- we're going to project full year revenues at over -- between $270 million-plus. So obviously, the second half would be at least equal to the first half, and we expect even stronger second half than we have in the first half.

Marco, let me just add one thing here and maybe to add a little additional color here. What we've never had before is this network and RPA and how we recognize revenue. Both are growing businesses for us. So as you build up the business, clearly it adds to the recognition -- pushes things out as you are in a growth business there. So we're -- this is our first year ever with both of those. So even though in prior years our first half has always been, I think, about slightly higher than the second half, not so sure that, that would be the case this year because of network and RPA. And that's why we're so confident on our revenue bands, if you will, for the full year. But this is kind of a one-year anomaly because next year, the recognition rules all change again.

Got you. And do you have any color on the change in revenue recognition for fiscal '18, how's that going to be altered?

Well, I mean, next year, again, the revenue recognition will change so that, for example, for an RPA deal where we have to wait until we have implementation so we could be working on a 4-month engagement and have no revenue during the first 4 months, and then book -- then start booking revenue over an 8-month period, with RPA, we will be able to record the software in the month that we sell the software, and we'll be able book the delivery, the advisory services to implement the RPA software beginning in the month when the engagement starts. So it sort of accelerates the revenue recognition. In addition, in the contingency-based revenue, where now we book it all in the month where we complete the engagement, now under -- in 2018, we'll be starting to book revenue the first month the engagement started. We'll estimate the amount of revenue that, that engagement will generate. And it might be a 4-month implementation, where we're currently -- we're booking all that revenue in the fourth month. And starting in 2018, we'll be able to spread the revenue over the first 4 months. So it has the impact of accelerating revenue versus the 2017 that -- and it also has more alignment how we're incurring the costs of those engagements. So there'll be both. You have costs and revenue being booked in the same time, where now we have months where there's just cost and no revenue on that particular engagement.

Got you.

For more details, more to come on that.

Very helpful. I'm sorry, again?

More to come on that as we disclose the impact of that next year.

Got you, very helpful.

And obviously, this is not unique to ISG. This is a new standard that's going to impact many companies, particularly any company that has a software or a contingency-based deal.

Got you. And last quick question. I think you guys mentioned in your prepared remarks, in Europe, U.K. kind of being stable and moving past the Brexit uncertainty. Maybe if you could provide a little color there. Is this anecdotal-type evidence talking to your clients? Or are there any other sort of trends you're seeing in there that make you feel fairly confident about those statements?

I mean, a couple of things, Marco. One is, the first half was essentially flat. Maybe up a tick but essentially flat. So at the beginning of the year, we said, look, we're going to plan on a stable U.K. environment. Back half of last year, we know that decisioning slowed or stopped or went to a snails pace. We're now seeing an uptick on our robotics services there because it's a bit quicker. And no matter what happens to their operations, they can transfer easily. I think one of the other analysts asked the question about financial services. We're seeing much more activity now on the financial services stream. We're in those businesses. So again, we're going to knock on wood here because we don't know exactly what the uncertainty will be. But certainly, the activity level has increased. And we would expect if that activity level turns into some new engagements, that we would see an uptick in the U.K. sooner rather than later.

And that is all the time that we have for questions today. At this time, I'd like to turn the call back over to Mr. Holt for any additional or closing remarks.

Okay, thank you. This is Mike. Let me just close by saying thank you to our approximately 1,300 professionals around the world. It is really their ability to help our clients achieve operational excellence and faster growth, especially through our digital transformation services, for the reason -- for our strong performance in the first half. And I want to thank all of you on the call for your continued support and confidence in ISG. Have a great day, and thanks for joining us.

This concludes today's call. Thank you for your participation. You may now disconnect.