Information Services Group Inc. Q2 FY2020 Earnings Call

Good day 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 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 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 would 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 this morning 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 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 or the SEC's website. 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 greater transparency on key measures we use 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 we 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. Let me start by saying ISG delivered a very solid second quarter, in spite of the pandemic. Although revenues were down, they exceeded our expectations, and we more than doubled our EBITDA from the first quarter, thanks to our aggressive cost actions and client demand for our higher margin pandemic ready services. Our balance sheet is very strong, with our debt leverage ratio down to 2.6 times EBITDA and with cash sitting at $32 million, boosted by a record operating cash flow of $22 million in Q2. Over the last 12 months, ISG has generated $47 million of cash, a testament to the cash generating power of our business and our disciplined operating approach. Let me put these results in perspective. GDP in the U.S. in Q2 was minus 33%. In the Eurozone where ISG also operates, it was worse, minus 40%. Many of our ISG industry segments were significantly affected by the pandemic and economic downturn. Hospitality, banking, consumer, and manufacturing were all down double-digits. On the flip side, client revenues in our insurance, public sector, retail, media, and telecom verticals were all up double-digits and our ISG research business, which has been a vital source of authoritative insight during the pandemic was also up double-digits. In a world evolving into all things digital and remote, I'm proud to say we marshaled our exceptional talent to help ensure the business continuity of our clients, while prioritizing the health and wellbeing of our people and continuing to deliver on and exceed our financial commitments. Through good times and bad, ISG is there for all our clients, ready to support them with our diversified recession resilient portfolio of must-have services. That is why we retain 85% of our client base each year. Our performance this quarter was helped by sales of our high value, higher margin products and services, especially those in high demand during the pandemic. These include our rapid cost takeout services, our ISG GovernX, vendor compliance and risk management solutions, now with 10,000 users, up more than double since the onset of the pandemic. Our network services to enable remote working, our captive asset monetization services, and, of course, our digital services, which now represent 50% of our revenues, up from 45% last quarter. Although some clients are slowing their transformation initiatives, they continue to invest in digital and with good reason. Our clients and ISG both understand that those who continue to expand their digital capability will recover faster and emerge stronger from this crisis. If there is a bright spot in all of this, we see the pandemic as an accelerator of digital transformation, as clients accelerate their move to the cloud, adopt future workplace technology, and upgrade their connectivity. We expect demand for our digital services to be turbocharged in 2021. With these market and industry insights as a backdrop, let me detail our financial performance. To reiterate, our revenues and EBITDA for the quarter exceeded our expectations. Revenues were down $10 million to $57.4 million due to the overall impact the pandemic had on clients' spending levels. A couple of other factors came into play. One, our revenues were reduced $2.4 million from the loss of billable T&E money. That was simply not there due to the ban on business travel. And two, we offered reduced rates and extended terms to some of our clients hardest hit by the pandemic, including those in travel and hospitality. From a profit perspective, our adjusted EBITDA of $7.4 million was more than double the prior quarter, thanks to our early and aggressive cost actions and our higher margin mix of products and services that are helping our clients weather this downturn. We will likely continue to see revenue pressure in the near-term, as clients delay spending on major technology initiatives, even as demand remains focused on our higher margin pandemic ready services. As a result of our actions and our resilient portfolio, our financial position today is significantly stronger. As I mentioned, we generated a record $22 million in cash flow from operations in the quarter, and we used $6 million to further pay down our debt, now with a leverage ratio of about 2.6 times, the lowest since 2016. Additionally in the quarter, we served 424 clients. That's up 4% from Q1. Our recurring revenues were $19 million for the quarter, representing 34% of our total. And we ended the quarter with $32 million in cash, up from $17 million in Q1. We recently took another step in our go digital journey with the tuck-in acquisition last month of Neuralify, which gave us 40 new clients and a significant new digital platform training capability, especially important in today's remote working environment. As of today, we have now fully integrated this business into ISG automation. Our automation business was not immune from the softness in the quarter. However, the size of our automation pipeline is building to its highest level since we launched this business a little over three years ago. That is a direct result of the growing demand for the digital transformation services. We see accelerating growth in our broader business as we move into 2021. Looking at the overall automation industry, the leading robotic process automation company UiPath in July announced it closed on its Series E investment round, raising $225 million at a post-money valuation of $10.2 billion. We estimate this valuation to be about 30 times revenue. During the quarter, we also expanded our automation ecosystem by forming a global partnership with NICE, a leading provider of automation solutions. Now, turning to our regions. The Americas delivered $32 million in revenue in the quarter, down 14% sequentially from Q1, a reduction in client billable T&E contributed about 500 basis points to this decline. As mentioned, we accommodated a number of clients in the U.S. on rate reductions, extended terms, and other areas in some of the harder-hit segments like automotive, travel, and hospitality. We did see good growth in our higher margin services of cost takeout, network, and digital, and in industries like consumer and insurance, both up double-digits sequentially. Key clients in the Americas engagements in the second quarter included Walgreens, AIG, CSL Behring, Cushman & Wakefield, Otis Elevator and the state of Louisiana. Among our significant wins, ISG Research has been awarded a wide-ranging contract worth more than $2 million with a long-term ISG client and one of the world's leading professional services companies. In another win, a global leader in retail and wholesale pharmacy awarded ISG a $2 million engagement to support the transformation of the client's global technology operations. A Canadian utility company, a long-time ISG client, also awarded us an engagement totaling $2 million to provide a digital target operating model and sourcing strategy to enable enterprise agility and a scalable enterprise platform capable of supporting potential acquisitions. ISG was also awarded a $1 million contract with a new network and software advisory engagement with a diversified multinational healthcare enterprise. The new engagement builds on a well-received benchmark study completed late last year. And all of this was done in a remote selling environment. Turning to Europe. Our Q2 revenues of $21 million were down 5% from Q1. Germany fared extremely well, up 2% sequentially and 8% year-over-year. During the quarter, EMEA saw a doubling of our network services and almost a doubling of our research business. Among our industry segments, consumer and manufacturing were both up, offset by declines in banking, insurance, public sector, and technology. Key client engagements in Europe in the second quarter included Bayer, BNP Paribas, Munich Re, Ericsson and Qatar Airways. Among all wins, ISG has been awarded a $2 million engagement with a German oil and gas company to provide a range of technology advisory services, including security, sourcing, and vendor and contract management. Finally, in Asia-Pacific, we reported double-digit growth, with revenues up 19% to $5 million, driven by the public sector and our energy and life sciences industry verticals. Key clients in the quarter included Rio Tinto, the Australian Taxation Office, the Australian Department of Defense and the Department of Home Affairs, IAG, A&P Services, and ANZ Banking Group. ISG has been awarded a new contract for nearly $2 million with the Australian Department of Defense. ISG will serve as the technology advisor for DOD procurement, the fifth year we have done so. Now, let me turn to guidance. The crisis, as we all know, is far from over. Although there has been some flattening of the curve in some countries, we continue to see surges, and this is impacting our clients' decision-making, especially those in the consumer-facing industries. This crisis likely only begins to subside with the introduction of vaccines. Some businesses will have difficulty recovering, as witnessed by our $600,000 of bad debt write-off this quarter. Others will emerge with entirely new operating models. We expect our clients will focus on the near-term as they cope with the immediate business impact of the pandemic. And yet others like ISG will use this situation to emerge stronger. Apart from the pandemic-induced impacts on client demand, in Q3, we expect near zero client T&E reimbursable expense, which usually runs about 4% to 5% of our revenues. Though we are planning for our live ISG produced destination events to eventually return, we are not forecasting any revenue from in-person events for the balance of the year. This in a year when we had expected between $5 million and $10 million of events revenue. On the upside, as mentioned previously, we are seeing strong client interest in our rapid cost optimization services, supplier and risk management, network capability and resiliency, digital workplace solutions, and business recovery planning. Longer term, we think the pandemic will accelerate client demand for and investment in the digital transformation services ISG provides. Balancing all of this, we will continue to provide guidance on a quarterly basis based on assumptions we are making on a continued volatile environment. For the third quarter, we are forecasting revenues of between $53 million and $55 million, and adjusted EBITDA between $6 million and $7 million as a result of the cost actions we have taken in anticipation of higher margin services being delivered in the quarter. So, with that, let me turn the call over to David Berger, who will summarize our financial results.

Thanks, Mike and good morning everyone. To reiterate what Mike said, we managed through a difficult operating environment and delivered a solid second quarter. Revenues for the second quarter were $57.4 million compared with $67.3 million in the prior year, down 10% sequentially and down 14% in constant currency and a decline of 15% on a reported basis. Currency negatively impacted reported revenues by $700,000 versus the prior year. Reimbursable client travel costs were down $2.4 million, accounting for approximately 400 basis points of the decline. Reported revenues were $31.6 million in the Americas, down 40% sequentially and down 22% versus the prior year. $21 million in Europe, down 5% sequentially and down 6% in constant currency and 8% on a reported basis versus the prior year, and $4.8 million in Asia-Pacific, up 19% in constant currency and 13% on a reported basis versus the prior year. Second quarter 2020 adjusted EBITDA was $7.4 million, which was up more than two times sequentially and compared with $8.1 million in the prior second quarter. Included in adjusted EBITDA for the second quarter of 2020 was $600,000 in bad debt expense, reflecting a weakening credit position for some of our clients due to the pandemic. This compares to $75,000 of bad debt expense recorded for the full year of 2019. We reported second quarter operating income of $3.5 million compared with an operating loss of $700,000 in Q1 and up 7% from operating income of $3.3 million last year. Net income for the quarter was $600,000 compared with a net loss of $1.4 million in Q1 and up 48% versus net income of $400,000 in the prior year. Reported fully diluted income per share of $0.01 was flat compared with the same period in 2019. Adjusted net income for the second quarter was $2.9 million or $0.06 per share on a diluted basis compared with $1.1 million or $0.02 a share in Q1 and $3.2 million or $0.07 per share in the prior year's second quarter. Utilization for the second quarter was 70%. Quarter-end headcount was 1,279, essentially flat with last year. 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 second quarter was over $22 million, which was a quarterly record and $27 million for the first half versus under $1 million in the prior year's first half. As Mike indicated, we have generated $47 million of cash flow from operating activities over the last 12 months. We repurchased $1.4 million of shares in Q2, and we ended the quarter with $31.6 million of cash, which was up from $17.4 million in Q1 and $10.4 million in Q2 2019. We repaid $5.9 million of debt in the quarter, which lowered our debt to $80.9 million, which is down 7% from year-end and down 17% from a year ago. Our average borrowing rate for the quarter was 3%, which is almost half of last year's rate. And we had 48.1 million shares outstanding as of August 5. Mike will now share concluding remarks before we go to Q&A.

Thank you, David. To summarize, the global pandemic and economic downturn are impacting our clients as never before. Yet, in spite of this, ISG delivered a very solid Q2, thanks to our early and decisive cost actions in March and improved mix of higher margin products and services. Our revenue and EBITDA both beat our expectations, with EBITDA more than doubling from Q1. Our balance sheet is strong. Our debt leverage ratio down to 2.6 times and $32 million in the bank, after generating a record $22 million of cash in the quarter. Our liquidity gives us flexibility for both risk and opportunity. We continue to serve our clients without interruption and deliver the higher margin services they need to contend with the downturn. And we continue to operate our business with impeccable execution, reflected in both our Q2 results and Q3 forecast. Longer term, we see the pandemic being an accelerator for our clients’ digital transformations and demand increasing for our digital services in 2021. 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, thank you very much for calling in this morning. And now let me turn the session over to the operator for your questions.

Thank you. Our first question will come from Vince Colicchio with Barrington Research.

Hello, Mike. How are you?

Good morning, Vince. How are you?

Good. So, I'm curious; the government sector seems like it had a pretty good quarter. Are you anticipating in the U.S. some pressures in the second half, given the financial situation?

The public sector has performed well, both here and in Australia. Currently, we do not expect issues, as some of the new work we've secured is multiyear and will support us through the latter half of the year. We understand that states may face pressure due to the pandemic, but this might also lead to a quicker need for cost reductions, which is what we assist our clients with during their transformation. We’ve achieved successes in Louisiana and Florida, and we typically find that Republican-led states are more open to rapid cost-cutting measures, which should benefit us in the upcoming months. We are monitoring the situation closely, but at this time, we do not foresee any weakening in this area.

And the strength in Germany, does that have legs in the second half?

I think, first of all, during the second quarter, one of the advantages we had there is we have a number of very large anchored clients, including a lot of the manufacturing clients in Germany. So, look, I think Q3 is always a little more challenging in Europe because, despite COVID, they are all planning to take their vacations, if you will, but our pipeline is strong. And I would expect in the back half of the year, not so sure, Q3 will probably have closer to Q2 just because of vacations, but we see Germany holding up pretty well over there.

And where are we in dealing with helping customers financially? Are we past that type of relief, or are you still working on some of that?

It’s a combination. We provided around 120 days of relief for several clients, which involved a significant reduction of between 25% and 50%. Throughout this period, we maintained operations for our entire team. We anticipate that during the latter half of the year, we will have several clients in a similar situation, particularly in sectors like hotels and cruise lines, where we have important relationships. We intend to continue our support for them, similar to how we assisted General Motors during the recession before their bankruptcy filing. They have been a client for over a decade. While we are seeing some relief on the automotive side, the hospitality and travel sectors are still under pressure, and we expect this to continue as we work with our clients to navigate these challenges.

Okay. Thanks, Mike. Nice job in the quarter.

Yeah. Thanks, Vince.

Thank you. Our next question will come from Marco Rodriguez with Stonegate Capital.

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

Good morning, Marco.

Hey, I was wondering if you could spend a little bit more time on the digital application. Just talk a little bit more in detail, if you can, on the areas or pockets of demand that you're seeing perhaps accelerate right now because of the pandemic? And then what sort of applications you see really using the word that I think you had in the prepared remarks to turbocharge your digital services in 2021.

I think I would break it down into four or five key areas: the workplace of the future, the future of contact centers, and cloud and networks. I emphasize cloud because those businesses that were already making progress on their digital transformation are now speeding it up, while those lagging behind have been highlighted. Many companies are also considering remote work for several upcoming quarters. When we look at these areas, they focus on technology modernization and enterprise agility, particularly in contact centers where being in one physical location isn't necessary. Managing this shift will require more bandwidth, network capabilities, and tools. These are what we define as digital areas that we anticipate will be significant in the next couple of years. Additionally, we are noticing a trend for clients looking to monetize their data centers. For instance, we are assisting a large insurance company in divesting from their physical data center facilities. They plan to sell those assets to a major provider, which could lead to significant financial returns through a long-term arrangement. This strategy could quickly generate $100 million, $200 million, or even $300 million from data center asset monetization. These are the main areas of focus.

Very helpful. And then how should we think about the digital demand and how that kind of dovetails into your goal of reaching $100 million in recurring revenue by the end of fiscal 21?

There are two aspects to consider: recurring revenues and digital revenues. Our digital revenues reached 50% this quarter, and our goal is to have two-thirds of our revenue from digital sources by the end of 2022. This includes cloud, workplace, and network services, all aimed at digitizing enterprises. We have made significant progress, moving from around 20% three years ago to 45% at the end of last year, and now we're at 50%. We are on track to reach the 65% target. Over the next 12 to 24 months, we aim to achieve $100 million in recurring revenue, focusing on establishing an annuity-based revenue stream. The Neuralify acquisition supports this with their subscription-based learning platform, which aligns well with remote working. Additionally, our research business has seen significant growth during the pandemic, largely through subscription models. We are developing new products and enhancing our current offerings as we work towards increasing our recurring revenues to $100 million over time.

Got it. And then in terms of the quarter, on the expense side, can you maybe quantify what was sort of the temporary cost takeouts? And then how should we think about those costs as we progress through the rest of this fiscal year?

We have significantly reduced discretionary spending, including marketing and travel costs. Moving forward, I believe that most of these reductions will be permanent as we adapt our business model in response to the pandemic. We are developing an integrated delivery platform within ISG that will allow us to operate without needing to be physically present at client sites as we did previously. This shift will enable us to utilize our global talent more effectively, such as having a team member in Germany support a property and casualty insurance firm in the United States or a cybersecurity expert in the U.S. assist a German manufacturing company. Previously, clients required our personnel to be on-site, but the changing landscape presents us with an opportunity that we intend to capitalize on. This transition will alter our cost structure as we move into 2021. Most of the changes we are implementing will be permanent, with some costs potentially being replaced by others. Overall, we anticipate that almost all of the costs we are eliminating will be close to permanent.

Understood. And last quick question, Mike. On the cash flows, very well done for the year-to-date here period for generating cash flows from operations. Just kind of wondering if you can talk a little bit more about the drivers there? How much of the working capital liquidation kind of helped with driving that? And then how should we think about cash flow from operations in the second half of the year?

To reiterate, we generated $22 million in cash for the quarter, $27 million for the first half, and $47 million for the last 12 months. A significant factor in the cash flow is the accrued expenses contributing $8 million positively to the cash flow statement. The main driver was the government stimulus programs we accessed, which we discussed last quarter. In the U.S., payroll taxes have been deferred into later this year and the next two years. We also utilized similar stimulus programs globally in payroll and VAT. Furthermore, we achieved more than double EBITDA despite lower revenue. This means we generated profit with a reduced expense base. Another major contributor to the nearly $19 million working capital gain was a decrease in receivables. While we can't expect to replicate that level of cash flow in the second half, we do anticipate a positive cash flow for that period.

Got it. Thank you very much, guys. I appreciate your time.

Thanks, Marco.

Thank you. Our next question will come from Joe Gomes with Noble Capital.

Good morning.

Good morning, Joe.

Let's continue discussing cash flow. You have accumulated a significant amount of cash. Are there any immediate plans for its use, or will it be reserved for potential opportunities as we anticipate a rebound in the economy in the near term?

No, it's more than just that. We have nearly $32 million in cash. In these uncertain times, we believe it's wise to keep this cash available. It provides us with the flexibility for risks or new opportunities as we move forward. We're confident in our position and will continue to assess how we use our cash as economic conditions become clearer.

You mentioned expecting some positive cash flow in the second half. Do you anticipate that this will continue to increase the cash reserves or be used to further lower debt?

Again, we'll evaluate. We'll definitely pay down the $2.5 million of debt that is required and continue to evaluate how to use our cash in the second half of the year based on economic events.

Okay. Last quarter you mentioned that you have been investing in the ISG automation business sales team. I'm trying to understand if there has been any progress in terms of pipeline development or increased contacts since you've doubled that sales team.

Yeah. So, good question. They were not immune; they were also soft in Q2. However, as I think I indicated in the overall remarks, the pipeline as a result of us building that sales team is now at the largest level that we've ever had in the three years since we launched this business from scratch. So, the question really will become the timing for us to close what is a fairly large pipeline. I don't have a good answer for you yet because decision-making is still somewhat slow, but we have some very large deals in the pipeline. So whether they materialize in Q3 or Q4 is to be determined, but we're very pleased with the sales team and the investments that we have there. And now with a very large pipeline that, depending on how fast clients will move, will benefit us either during the back half of this year or into the early part of 2021.

Okay. Thanks for that. And then, if you could provide a little bit more detail on the Neuralify acquisition. I mean, is it going to have any impact at all on second half results? And maybe a little more color on how that really helps expand or drive some of the automation business for you guys.

So, it will be a small impact; not material in the back half of the year. However, what it has done has brought a series of clients—40 that we did not have in ISG automation. The plan is because we have a relationship there, we plan to expand the services among those 40 clients as we go forward, and that is helping contribute to our larger pipeline. We've already had very good success with Neuralify during the month of July on deals that would not have happened had it not been for the combination. So, in a world where you're home working, trying to find brand new clients from scratch is difficult for business development. But if there is an existing client relationship, then we can push much harder, and that's where the sales efforts are being focused on. Neuralify will assist us, and we think will help with the ISG automation business during the back half and as we move into 2021. That's helping build this large pipeline that we are now building in ISG automation.

Okay. Thanks for that. That's it for me. Nice quarter guys in challenging times.

Yeah. Thanks, Joe.

Thank you. Our next question will come from Marc Riddick with Sidoti.

Hi. Good morning, gentlemen.

Good morning, Marc.

I actually wanted to follow up on what you just said there and maybe shift that over to some of the new business wins that were mentioned in your prepared remarks, which were certainly very encouraging. I was wondering if you could touch a little bit on some of those new business wins that were not. So, what that mix might have looked like as far as that extension or expansion of existing relationships versus any new relationships that were part of those amounts of new business wins? And then I have a couple of follow-ups on top of that.

It was a mix of new business development and expanding existing businesses. While new business development has been somewhat challenging, we've achieved significant success with a large retailer regarding their network business, a major manufacturer with GovernX for supply chain management, a large retailer in Germany undergoing transformation, and one of the leading telecom companies globally for contract management using GovernX. Additionally, we secured a multimillion-dollar deal with one of the largest professional services firms, and a large insurance company is working with us as they transform and digitize their claims processing through automation and operations. We also had several wins in the public sector in both Australia and the U.S., focusing on technology enablement to reduce costs, such as with the Tax Office in Australia and the state of Louisiana's Department of Health. In this context, around 50% to 75% of the business came from existing clients, while 25% was from new clients. Notably, our client count in Q2 has increased compared to Q1, which is positive news, as gaining initial traction helps us expand the business over time. Overall, we experienced a growth of about 4% in clients this quarter.

And certainly encouraging in a challenging environment to get new clients in this environment. It's pretty good. And so congratulations on that. I did want to touch a little bit on the utilization level that you mentioned. I think you said it was around 70%. Is that sort of ballpark what you were looking for? Is it close to what you were expecting now? How should we maybe think about that going forward as they continue to get more experienced, I suppose, working from home and get a little closer to some more implementation of projects?

We expect the utilization level, currently at 70%, to continue to increase. Working from home has not had a significant impact. Our advisors are fully engaged and have adapted to delivering the product remotely. Therefore, we anticipate ongoing improvements in utilization as the new model is implemented.

Okay. Great. I just want to confirm the numbers. Essentially, due to the travel and currency effects, there was over $3 million in affected revenue. Even though you mentioned it was a strong revenue quarter, it could have been even better without these factors. Is that an accurate interpretation?

Correct.

Okay, great. And then the last thing for me. I just want to talk a bit about the…

Yes, I wanted to mention one other aspect to consider for this quarter that differs from our historical experience, which is bad debt. We encountered about $600,000 in bad debt primarily from clients in the hospitality and travel sectors. It’s worth noting that we haven't seen $600,000 in cumulative bad debt over the past few years; last year, it was below $100,000. This indicates that some clients have been significantly affected. When you factor this in along with the travel and entertainment revenue and currency impacts, there are some unique circumstances at play this quarter.

Thank you for the additional information. I wanted to address one last point. Mike, could you elaborate on the decision-making process, which seems to be progressing a bit slowly but is still moving forward? I'm interested in your observations related to some of the enterprises you're working with, especially as they're considering the steps toward implementation while still determining their initial actions. Could you share some insights on that decision-making process and how it is unfolding, as well as your role in it overall?

It varies by industry. We observed significant growth in sectors like retail and insurance, while seeing a decline in areas such as travel, hospitality, and some automotive segments this quarter. The pace of change varies, and we categorize companies based on their needs. Some industries are focused on immediate cost reductions and short-term planning, where a long-term perspective is only about 12 months. They seek cost cutting, enhanced network capabilities, and future workplace solutions. Other sectors, such as healthcare, pharmaceuticals, and utilities, are experiencing some contraction. We expect reductions primarily in travel and hospitality. The decision-making speed and the services required differ based on the industry's current challenges, including supply chain issues and shifts in consumer behavior.

Okay. Okay. That's very, very helpful. Thank you very much.

Okay. Thanks. Thanks very much, Marc.

Thank you. And at this time, I am not showing any further questions in the queue. I would like to hand the call back over to our speakers for any closing remarks.

Thank you very much. Let me close by saying thank you to all of our professionals worldwide for stepping up to the challenges presented by this coronavirus. Even working remotely, there has been no letup in the intensity of our collaboration and client engagement, nor the passion for delivering the best advice and support to our clients. And for that, I thank you. And thanks to all of you on the call for your continued support and confidence in ISG. Stay well, everyone. Thanks very much.