Second Quarter 2009 Results

ISG reported total revenues of $31.5 million during second quarter 2009, a decrease of $19.2 million (or 38%) from $50.7 million in the second quarter of 2008. Reported revenues decreased 33% before the impact of currency translation. Fee revenues (revenues before client reimbursable expenses) aggregated $29.4 million during the second quarter of 2009, a decrease of 37% year-over-year (down 32% before the impact of currency translation). Revenues in the Americas decreased 33% for the quarter as current and prospective clients deferred sourcing decisions in the face of the continuing economic downturn. Revenues from international operations decreased 32% on a constant currency basis from a record performance in second quarter 2008 as clients, particularly in Western Europe, adopted a more cautious approach to implementing sourcing strategies in the face of the downturn. International revenues in the second quarter of 2009 were down 44% year-on-year including the impact of currency translation.

Reported operating income for the three months ended June 30, 2009 totaled $1.4 million compared with $5.6 million during the same 2008 period. Excluding the impact of year-on-year currency translation on reported revenues and expenses, operating income decreased $3.0 million or 70% from second quarter 2008 levels. Second quarter 2009 earnings before interest, taxes, depreciation and amortization (EBITDA, a non-GAAP measure) totaled $3.8 million (12.8% of fee revenues), compared with second quarter 2008 EBITDA of $8.1 million (17.4% of fee revenues). Excluding the impact of currency translation, EBITDA decreased $3.2 million or 46% from second quarter 2008 levels. Second quarter 2009 operating income and EBITDA include $1.6 million in severance charges offset partially by a $0.6 million gain related to vacation accrual adjustments which have no prior year counterpart.

The declines in operating income and EBITDA reported during the second quarter of 2009 were primarily the result of lower revenue levels in all regions as well as one time severance charges and unfavorable currency translation. During the second quarter, direct costs as well as selling and general and administrative expenses were reduced 38% and 29%, respectively as ongoing cost productivity programs partially offset the impact of lower revenues and one time severance related charges.

Reported fully diluted earnings per share (EPS) for the second quarter 2009 totaled $0.00 versus $0.08 for the same 2008 period. Fully diluted cash EPS (a non-GAAP measure) for the second quarter of 2009 was $0.09 compared with $0.17 for the second quarter of 2008. The decrease in diluted cash EPS was principally attributable to lower revenues and one time severance related charges offset partially by decreased income taxes and lower net interest expense.

First Half 2009 Results

ISG reported revenues of $65.8 million during the first half of 2009, a decrease of $30.4 million or 32% compared with $96.2 million in the first half of 2008. Excluding the impact of currency translation on reported results, first half 2009 revenues decreased $22.1 million or 26%. Fee revenues (revenues before client reimbursable expenses) aggregated $61.3 million during the first half of 2009, a decrease of 31% year-over-year including the impact of currency translation (down 25% before the impact of currency translation). Revenues in the Americas decreased 29% for the first half as current and prospective clients deferred sourcing decisions. Revenues from international operations decreased 20% on a constant currency basis from a record performance in the first half of 2008 as clients, particularly in Western Europe, adopted a more cautious approach to implementing sourcing strategies in the face of growing macro-economic uncertainties. International revenues in the first half of 2009 were down 35% year-over-year including the impact of currency translation.

Operating income for the first six months of 2009 was $3.4 million, a $6.0 million or 64% decrease from a first half 2008 total of $9.5 million. Operating income decreased 57% before the impact of currency translation. ISG's first half 2009 EBITDA totaled $8.2 million (13.3% of fee revenues), a decrease of approximately 46% (38% before currency impacts) or $6.9 million from first half 2008 EBITDA of $15.1 million (17.0% of fee revenues). Decreases in both operating income and EBITDA for the first half of 2009 resulted primarily from lower revenues in the Americas and Western Europe and a one time foreign currency related gain in 2008 which had no current year counterpart; partially offset by a 28% reduction in operating costs attributable to the Company's productivity programs implemented over the past 18 months. First half 2009 operating income and EBITDA include the impact of $1.7 million in severance charges offset partially by a $0.6 million gain related to vacation accrual adjustments which have no prior year counterpart.

Reported fully diluted EPS for the first half of 2009 totaled $0.02 versus $0.13 for the same 2008 period. Fully diluted cash EPS for the first half of 2009 was $0.19 compared with $0.31 for the first half of 2008. The decrease in diluted cash EPS was principally attributable to lower revenues and severance costs offset partially by decreased income taxes and lower net interest expense.

Other Financial and Operating Highlights

Cash and cash equivalents aggregated $45.8 million at June 30, 2009, a decrease of $15.3 million from year end 2008.