And Ladies and Gentlemen, please stand by. Good day, and welcome to the Information Services Group Fourth Quarter 2021 Results Conference Call. Today’s call is being recorded, and a replay will be available on ISG’s website within 24 hours. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Barry Holt.

Please go ahead sir..

Thank you, Operator. Hello and good morning. My name is Barry Holt, I’m a Senior Communications Executive at ISG. I’d like to welcome everyone to ISG’s fourth quarter conference call. I’m joined today by Michael Connors, Chairman and Chief Executive Officer; and Bert Alfonso, 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, that was furnished last night 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 and any other relevant documents including any amendments or supplements to these documents filed with the SEC. You will be able to obtain free copies of any of ISG’s SEC filings on either ISG’s website at www.isg-one.com or the SEC’s website at www.sec.gov.

ISG undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

During this call, we will discuss 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 upon today, are 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 non-GAAP measures presented to the most closely applicable GAAP measure please refer to our current report, on Form 8-K, which was filed last night with the SEC. And now, I’d like to turn the call over to Michael Connors, who will be followed by Bert Alfonso.

Mike?.

Thank you Barry and good morning everyone. Today I will review our record fourth quarter and full year results, our continuing business momentum in 2022 and our outlook for the first quarter. ISG had an outstanding fourth quarter, capping off a historic 2021 our best year ever.

We generated record Q4 revenues of $70 million and ended the year with record full year revenues of $278 million. We continued to expand our recurring revenues in Q4 up 14% from last year to $24 million bringing our full year total to $93 million up more than 11% and well on our way to our 2022 year-end target of $100 million.

We delivered record Q4 adjusted EBITDA of $10 million up 11% from the prior year with an EBITDA margin of 15% up nearly 100 basis points. For the full year, our adjusted EBTIDA reached $39 million up 37% with an EBITDA margin of 14% up 250 basis points.

We ended the year with a cash balance of $48 million up 9% and a net debt to EBITDA ratio under one. From a client perspective, we served a record 853 clients in 2021 up 13%. Of that total, 270 were brand new to ISG, an increase of 20% year-over-year, a healthy sign for a growing business.

Coming off our record year we have entered 2022 in excellent position to extend our business momentum. Demand for digital continues. More work is moving to the cloud to power applications and optimize customer and employee experience. Cyber Security is no longer just the concern of the IT department.

It is being discussed at the board level amid growing cyber threats. We expect M&A activity to increase in 2022 and that will drive demand for cost optimization and rationalization of technology, both sweet spots for ISG. Companies are in continuous transformation mode, and have on-going and evolving digital needs across the enterprise.

But putting it all together is complicated. Clients need a trusted partner like ISG to make sure their technology and people are integrated and working to get together to achieve business goals. We're focused on all key areas that matter to our clients.

Cyber security, customer experience digital workplace, data analytics, app monetization, digital engineering, and enterprise cloud. Our comprehensive portfolio of products and services is unmatched in our industry.

And our solution centric ISG next operating model is designed to deliver the most value to our clients and to do so with greater agility and efficiency. The result is growing revenues, more clients and higher profitability and ultimately more value for our shareholders.

Our long term growth objectives remain high single digit revenue growth and EBITDA at one and a half times our top line growth as we leverage our business model for growing profitability. As always, we strive to exceed these targets just as we did in 2021. Now turning into our regions.

The Americas delivered $39 million of revenue in the quarter, up 3% versus the prior year. For the full year, revenues were $160 million, up 13%. During the quarter, we saw double-digit growth in our consumer services, banking and media industry verticals. Among our services, research, automation and government acts were also up double-digits.

Key client engagements during the fourth quarter included Caesars Entertainment, USAA, Exelon, and Humana. Among our notable wins ISG is supporting a major cruise line with our GovernX vendor management solution. The client is now gaining greater visibility into it’s spend with nearly 250 vendors and it saved millions of dollars as a result.

This is especially important at a time when the cruise industry is looking to recover after a difficult period during the pandemic. ISG is also supporting a major U.S. utility as it separates into two publicly traded companies.

We are advising the company on a range of technology and operations decisions as it divides its technology estate, and looks to optimize its cost base for both entities going forward. Turning to Europe, our Q4 revenues of $24 million were up 3% versus the prior year, and 6% in constant currency. For the full year revenues were up 4%.

For Q4, Europe delivered double-digit revenue growth in our research, network and automation businesses and in our public sector, insurance, media and banking industry verticals. Key client engagements in Europe in the fourth quarter included Munich Re Volkswagen, Deutsche Bank, and Italy's Ministry of the Interior.

During the fourth quarter ISG was awarded a $1.5 million engagement with a major bank in the Nordics region to support one of the industry's largest digital transformation efforts.

We also expanded our work with a major German insurance and financial services company to help them navigate a complete revamp of their digital approach, including tech modernization, workplace transformation, cyber security, and software cost optimization.

And in the transportation sector, we are helping a major international shipping company establish an offshore delivery center in India to support the client’s global IT operations.

Now turning to Asia Pacific, this region had a record setting Q4 performance with revenues of $7 million, up 27% versus the prior year, driven by growth in banking, insurance, media and the public sector industry verticals. For the year, Asia Pacific had record revenues of $27.4 million up 32%.

Key clients in the quarter included the Australian Taxation Office, Australian Ministry of Defense, Bupa Australia, a health insurer, Rio Tinto, and Suncorp. We continue to grow our business in the region with a leading multinational engineering services company focused on the energy industry.

ISG is helping the client leverage technology to transform its global business services across all major functional areas of the company, from finance to HR to optimize performance and lower costs.

Now moving to our dividend, shareholders of record of the close of business on March 21 will receive a first quarter cash dividend of $0.03 per share of common stock payable on April 6, part of our ongoing efforts to enhance shareholder value. Now, let me turn to guidance.

The pandemic continues to have lingering effects on several client industries, and in certain markets in Europe or vaccination rates and COVID restrictions have been uneven.

However, with signs of improvement and with more restrictions being lifted, we are hopeful that we are entering the endemic phase of the virus and we'll see these markets rebound during the course of 2022. As for the crisis in Ukraine, we stand united with Ukrainian people in their struggle to remain a free and sovereign state.

Ukraine has become a major hub for technology services, particularly software engineering and development. Those activities as you would imagine, are being moved elsewhere. Although ISG has no operations or people in Ukraine, a number of our enterprise clients rely on providers either located in or obtaining services from Ukraine.

As we did with the pandemic, we are committed to helping them adjust their plans and overcome any potential challenges. Overall, we think the situation Ukraine if contained will have only a small impact on the global market for technology and business services.

And it is possible it could spur companies to invest even more in cyber security and other digital initiatives.

So balancing digital demand with these macro factors, for the first quarter we are targeting revenues of between $69 million and $71 million including a negative FX impact of approximately 200 basis points principally from Europe and adjusted EBITDA between $9 million and $10 million.

Looking beyond Q1, we expect growing momentum in our digital revenues as we move through the rest of the year. So with that, let me turn the call over to Bert who will summarize our financial results.

Bert?.

Well thank you, Mike and good morning to everyone. Looking at the fourth quarter, our momentum continued as we close out a record breaking year. Revenues for the fourth quarter were a record $69.6 million up 5% on a reported basis, and up 6% on a constant currency basis, compared with the fourth quarter of last year.

Currency negatively impacted the reported revenues by $0.7 million versus the prior year. The Americas reported revenues were record $38.9 million, up 3% versus the prior year. And Europe revenues were $23.7 million up 3% and up 6% in constant currency. And Asia Pacific, the reported revenues reached a record $7 million of an outstanding 27%.

Fourth quarter 2021 adjusted EBITDA was $10.2 million, up 11% from last year's fourth quarter, resulting in an EBITDA margin of 15%. Fourth quarter operating income increased 104% to $7.1 million, compared with $3.5 million in the prior year.

Net income was very strong for the quarter at $3.6 million or $0.07 per fully diluted share, compared with net income of $1.4 million or $0.03 per fully diluted share in the prior year.

Fourth quarter adjusted net income was $5.1 million or $0.10 per share on a fully diluted basis, compared with adjusted net income of $4.9 million or $0.10 per share in the prior year’s fourth quarter.

Consulting utilization for the fourth quarter was 71% and 74% for the year, up 300 basis points versus the prior year, reflecting the impact of our ISG next operating model. Our balance sheet continues to have the strength and flexibility to support our business over the long term. For the year, net cash provided by operations was $41.9 million.

And we ended the quarter with $47.5 million of cash up 9% from $43.7 million in the prior year. We repaid $1.1 million of debt in the quarter, lowering our debt balance to $74.5 million and our net debt-to-EBITDA ratio to 0.7 times.

And we returned $4.5 million to our shareholders in the fourth quarter, paying $1.5 million in dividends and repurchasing $3 million of ISG shares. For the full year, we returned $20.7 million to shareholders in the form of $4.4 million in dividends and $16.3 million in share repurchases.

Our average borrowing rate for the quarter was 2%, down 20% from last year's 2.5 and we had 48.9 million shares outstanding as of December 31. Mike will now share some concluding remarks before we go to the Q&A. Over to you Mike..

Thank you, Bert. To summarize, we camped our best year ever with record revenues and profitability in Q4. Revenue for the year was a record $278 million EBITDA was a record $39 million with an overall EBITDA margin of 14%.

Our ISG next operating model is driving a more profitable enterprise with a nearly 100 basis point improvement in our EBITDA margin in the quarter and a 250 basis point increase for the year. Our balance sheet remained strong, $48 million of cash and a net debt-to-EBITDA ratio down below one times EBITDA.

We rewarded our shareholders for the fourth consecutive quarterly dividend. And we have good momentum with growing client demand for cost optimization and ongoing digital transformation playing to the ISG sweet spots. 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..

And we'll begin with Marc Riddick with Sidoti..

Hey, good morning..

Good morning, Marc..

So very encouraging trends and a great way to finish the year. I was wondering if you could talk a little bit, I want to go back to some of your prepared remarks, Mike around the support that you guys provided to your clients during the pandemic, and kind of sort of help shepherd them through some of those challenges.

Because, given the what we're seeing with global events right now.

I was wondering if you could sort of touch a little bit on the those experiences that you had with those clients before, which can sort of help, give folks an idea of, of being sort of in a similar situation with what's going on with global events in the way that that played out?.

Yes, great, great question, Marc.

Look, during the pandemic, clearly, there were kind of I'll call it two extremes of, of clients in different industry segments on the one, those who took advantage because of the kind of way they operated, think about the retailers, and others that really took off during the pandemic, and you had others that were hit harder, like hospitality, cruise lines, etcetera.

And the services that we had to offer, were kind of in two different of those buckets, on the ones that were a little bit more distressed, we had our rapid costs take out, we had our network management, we had our digital workplace services, all helping them better understand that they were having to operate in a more distressed type of environment.

So we allow them and help them if you will, around cost optimization using technology using automation.

On the sides that were really trying to accelerate growth and take advantage of their market position and the ability to do what they could, with the change with the pandemic, we focused a lot with them on cloud with the client, customer experience, the employee experience.

And they use the time to kind of accelerate their digital transformation, moving much faster to the cloud, looking at their cyber services, their data, analytics, etcetera.

As we apply this, if you will, a little bit to the Ukraine situation, we're seeing kind of two things initially emerge; you have a number of enterprise clients who rely on providers who have operations in Russia, or Ukraine. Clearly, both of those are a bit at risk at the moment.

And so their immediate asks of us is how can we move work from those areas to other areas in a very rapid way, number one. And number two, if their businesses should slow down as a result of this, can you help us rapidly move cost out, at least on a temporary basis. And that's what we're doing.

On the other side, the providers who have operations in Ukraine and Russia are also asking us for help with the enterprises. And so we've got an opportunity on both the provider side and the enterprise side, during this kind of terrible disruption that's occurring in Ukraine. So maybe that hopefully, Marc that helps inform you a little bit..

It does. Thank you. And I was wondering, does the are you seeing is an odd way of asking this.

I guess, but are you seeing new relationships that are sort of coming to you that, and, unfortunately, a challenging situation? Or is it primarily your existing clients that you're working with there?.

Now that's another good question. We are, we are seeing a number of new clients who have come to us and said, look, we currently have been relying on X to provide services in areas like software and management, etcetera.

All the things that you can do for us quickly, because we do not believe we're going to get the level of service or the quantity that we need with our current providers. So we are seeing some of that inbound as well, Marc..

Okay, great. And then shifting gears to a little more pleasant topic. I guess the strong balance sheet improvement over the years certainly is very visible and I was wondering if you could sort of give a bit of an update, certainly returning capital shareholders and multiple ways.

I wanted to touch a little bit on maybe what you're seeing in the acquisition pipeline. It's been, I guess, has since , I guess.

So wondering if you sort of give some thoughts as to maybe what you're seeing there?.

Probably I’ll touch on the M&A and then ask Bert just to touch on the balance sheet itself. On the M&A we still remain active. As you know we we've done 10 acquisitions over our lifetime here at ISG, and we are continuing to look for areas that can provide an acceleration in the digital space or in the recurring revenue space.

So all things kind of technology recurring digital, that's the area that we're looking at. And we continue to look at it, and like we have in the past, we are very disciplined on pricing. But at the end of the day, as long as we have fairness on both sides of the deal equation, then we will be able to get deals done.

So we see the market good, we also see the opportunity coming out of the pandemic; they're individuals in different situations. And that may provide more opportunity for ISG on the M&A side.

On the balance sheet, Bert?.

Yes, good morning, Marc. With respect to -- to the balance sheet, we're very fortunate to have a business that's, that's a strong cash generator. And our cash flow from operations continues to be quite strong. I commented on some of the things that we're already doing, which we will continue to do. And so we're, we're committed to the dividend.

And with the board's concurrence growing that dividend over time, we've been active in the marketplace, as you saw in the fourth quarter. And we believe that that makes sense going forward in terms of share buybacks, and we’ll diligently continue to pay down our debt.

Although, as I mentioned with a 2% rate, we're certainly not going to accelerate those payments, but we continue to, to get a lower leverage ratio, which can help us with the comment you made earlier around M&A should that materialize. So we see that as a continuing trend for the firm. And, and those are key priorities..

On purchase, one extra one, I guess, for you.

Could you just show this CapEx, where we finished out and what we may be looking at for next year?.

Yes, one of the one of the areas that our investors are pretty familiar with is this is a very low capital intensive business. And so we'll range in sort of that 2 million, sometimes up to 3 million in terms of CapEx, primarily, most often it tends to be our laptop replacement, which we do over a period of time.

But, but from my from a real estate perspective, we, we really have very low requirements. We do invest in our SaaS platforms, as well, which are the ones that you're familiar with GovernX in our research area, but on the GovernX side, that that that platform, we continue to upgrade as we see clients desiring more, more capabilities..

Great. Thank you very much..

Okay, thank you..

Now hear from Joe from NOBLE Capital..

Good morning, Mike and Bert, congratulations on the quarter and a tremendous year..

Good morning Joe..

Thanks Joe..

Quick question on gross margins here. Just looking at our model looks like margin gross profit margin was up about 200 basis points in the fourth quarter from what we saw earlier in the year.

Just wondering what was behind that and what do you think that could be that level in 2022? Or do you think it retreats back more to the high 39 per to the 39% level?.

Yes, our gross margin has been reasonably stable at around 40. It has been ticking up slightly the predominant factor there is the mix of our revenues.

And so as, as Mike mentioned, our recurring revenues, which and in large part tend to be on a slightly higher gross margin as well as our digital services which are over 50% of our revenues now, do give us a benefit in that regard. So, we see continued positive growth in that space.

And from an SG&A perspective, continue to focus on cost control as well but, but yes, product mix is a benefit as well as I mentioned the digital component of the services..

Okay, thanks for that. And one of the some of the big issues here are not saying any everybody doesn't know here is the supply chain inflation, hiring. Just wondering, how you guys are dealing with those types of issues.

And on pricing are you looking to raise prices here, how's that competitive environment around the whole looking at raising of pricing..

So Joe on first on the on the pricing side of things, and then we'll talk about the staffing side. We continue to be able to have what we like to refer to as firm pricing. We, our strategy over the years, is to be fair, because we want a ROI on our clients. And we want our clients to stay with us for the long run.

So we feel that our pricing and our rate card, if you will, certainly we are beginning to move it up a bit primarily in the higher demand areas. So think about it as almost surge pricing, if you will. And so we can be quite firm in a lot of those areas as to Bert's point, the margins and round the digital and the recurring are higher for us.

And you're seeing that being reflected in our overall results. On the staffing front, we continue to have a terrific model we have for years. We were born virtual as a firm. We didn't want real estate, we had people working from home from the from day one in 2006. That model has played out well. We couple that with some ownership with our stock.

And we end up with owner operators roaming around our business and serving our clients and therefore our shareholders well over time. So that still seems to be quite steady. Our turnover rates have not really moved much, from 22 to 21, from 21 to 19, if you go back pre-COVID. So we've been very, I'll call it very lucky and very strong in that regard.

The only area that we're seeing the uptick in is really in India. And that's primarily because our India turnover had dropped significantly over the last couple of years. We used to run kind of around the low 20s. The industry out there as in the mid-20s. We dropped all the way down to kind of call up the 13%, 14% range in India.

We are seeing that uptick by about 400 basis points just with the India demand of workers in that environment. So we are seeing a bit of uptick in India, but still below our historic levels in India. That's what we are seeing for us..

Great, thanks. And one more if I may. I mean, you touched on briefly, you know, the new clients. I think you've mentioned 270 brand new through the year that was up 20% year-over-year.

What is driving the new clients that come to you, what in particular, is made ISG so attractive to potential clients that they're coming to you and, is it kind of word of mouth, so to speak, that that's bringing them in as a better more focused marketing campaign on your end to try and a little better idea, because it's awesome that that we're seeing the new client numbers continue to increase.

Thank you..

Yes, good question. Joe. I think the way I would answer that is I think the market moved right to ISG. We have a long term strategy that we put in place around go digital a few years ago, those investments are paying off.

And I think the intensity of the global 2000 organizations to stay competitive is kind of unleashed a huge wave of digital transformation. And because we've had great success, around I'll call it all things digital. And for us that includes cloud. It includes the customer experience.

It includes the digital workplace, modernizing applications and kind of data and analytics. Clients know they need an independent and skilled partner on their side of the table. And we have a embedded client base, that when they go from one company to the next, and with the great ROI that we have produced for them, they bring us over.

So if they're going to split a company, or if they move from Company A to Company B, we can help them navigate and kind of power through and help them with their technology and we have reputation through this pandemic. We started at pre-pandemic if you will, with Go-Digital and so our success has resonated in the market.

And we are getting great kind of word of mouth and client referrals from current clients who go from place to place. So we, we've skated to where the puck is if I can use that analogy, and I think that really is what is underpinned our strong performance last year, and we see that momentum moving on..

Great. Thanks for that, Mike. And again, congratulations on the quarter and the year. And I'll get back in queue..

Thanks, Joe..

We'll now hear from Vincent Colicchio with Barrington..

Yes. Good morning, Mike. Nice, nice quarter..

Morning, Vince..

So I'm just curious, maybe early, but you talked about how you benefit from the Ukraine situation.

Are you seeing any signs yet of delays or changes in sales cycles, and any areas of Europe related to the war?.

We have not. What we are seeing clearly is the close watch, especially in Europe. Think about Germany, France in particular. But what we think it has done, and I think you saw a little uptick in the fourth quarter, you'll see it, I think, as we move through 2022.

I think clients are now focusing in region there with making sure that they are armed and ready and prepared if other things escalate. And by that, I mean, they're getting their cost house in order. They want plans, they want to make sure how they can use technology and automation to assist them.

So in the area that I would, call kind of leading rapid change areas, those are beginning to pick up steam, as companies begin to kind of put preparations I'll call it Plan B into place. And that that plays, again to the ISG strengths. So that's what we're seeing in the early stages.

So we don't like to refer to it as taking advantage of the Ukraine situation, it’s just the Ukraine situation has created some anxiety around certain clients in that region. And that anxiety is just being transferred into wanting them, they want to prepare themselves. And in so doing, then they want plans on how they could move fast if they need to..

And thanks for that.

What caused the upside of the quarter versus your expectations?.

Well look, I think, I think that the whole, the whole move around the customer experience is accelerating, maybe at a faster clip, because now everybody needs a competitive advantage. So we're seeing that whole area that all has a technology thread to it. And as long as there's technology involved, that's our sweet spot.

And I would also say that the kind of the workplace of the future, or the digital workplace, very hot. We're very good at this. We're actually having a live event in New York City, for the first time on this topic since the since the pandemic, and the array of clients wanting to kind of showcase what they can do is very hot.

So I would say those areas in particular are, have picked up some good steam vents..

And some are related. If you're looking at your sales pipeline, I'm curious what service and solution areas with three or four, service and solution areas should be strongest and 22? I suppose those two you mentioned were -- are two of them..

Yes, and certainly, cloud migration, we all can say hey, people move into Cloud for while you're right.

But what is happening is the acceleration, the percentage of workloads that are in the cloud, there is still enormous amount of cloud implementation strategy, the economics around that developing kind of an application portfolio that you can migrate, designing kind of a cloud operational model for clients.

And then really scaling the enterprise cloud is kind of the next step. And when you do that, you have to build out, scale out kind of a strategy to scale. You need to kind of design a continuous level of compliance, as it relates to risk management for these enterprises.

So those areas are, in addition, because I'll call it kind of creating the roadmap and executing kind of the cloud migration application rationalization areas in addition to kind of I see the rapid cost takeout being there.

And then of course, helping clients with clients, with cloud security, the whole cyber area is even more pronounced with what is going on right now in Eastern Europe..

And I assume it's fair to say you'd expect, there's no setback to demand higher adjusted EBITDA margins for the year.

Is that fair to say?.

Yes, I mean, you'll recall that back in 2020, when we were around 11%, we said, we wanted to gain 400 basis points of EBITDA margin over a two year period. And, we're 250 basis points are so into that journey. So we are definitely looking to expand that in 2022 events..

And that explains the levers that you have. So offset the wage inflation, I assume scaling your revenue is one of them. But I'm particularly curious about utilization rates, so they have room to move up..

Well, we had you want to touch that one on Bert on utilization?.

Sure, in terms of our utilization, we ended the -- for the year we were at 74%. And we and we think that's a sustainable level. It could tick up from there. We certainly don't, we don't expect it to go to 80, to be perfectly honest, but the scale at the top line with a continuous sort of mid 70s, utilization will give us higher leverage.

And so we expect to be able to maintain that. We're not seeing a lot of demand for back to client, although we are planning for some of that, certainly on the back half of the year. And, and that's the way we, that's the way we think about it right now..

Thanks, guys. And again, nice quarter..

Now, we'll hear from Marco Rodriguez, Stonegate Capital Markets..

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

Hey, good morning, Marco..

Good Morning, guys. Mike, I was wondering, and maybe you could come back to one of your prepared remark comments on the overall long term model, upper single digit growth rates, and one and a half incremental flow through the EBITDA.

Obviously in fiscal 21, last couple of years are kind of unprecedented in fiscal 21, you had, some really nice flows through on the EBITDA line.

And with the ISG next model, you're kind of laughing as a year now, that's slightly lower operating expense model with thinks I was think, just kind of help us think through why maybe that that one and a half times flow rate might not be just a bit higher?.

Well, first of all, Marco, we always strive to be higher. Both of those are our, we call it our three year guidance, if you will. And our objective internally is to strive to exceed that. And you saw during 2021, we in fact, exceeded on both of those both with double digit growth on the top line.

And almost three times on the bottom line versus one and a half. So we're not going to get out over our skis. That's our guidance. And of course, we as a team have always strived to exceed that. And I think we have good proof that we are able to execute. And provided there are no macro environments that change things, we will continue to pursue that.

You'll note that we set in the first quarter we see that there is going to be an FX headwind in the first quarter. We estimated kind of approximately 200 basis points. So that has an impact on our reported results on the top line and a bit on the bottom line. So yes, but all of those things are manageable.

All those things are factored in to kind of our overall thought process there Marco..

And it's very helpful. Then, in terms of remarks, you made at the beginning. One of the things you talked about is there's still some areas that are being negatively impacted by COVID. Whether that's, just kind of shut down rates or what have you. I was wondering if maybe you can expand on that a little bit.

Just kind of describe the regions where you're seeing that and I know this is a difficult question but if you can kind of help us understand if those impacts weren't there, what that might mean to your revenues or meant to your revenues in fiscal 21?.

Yes. So let me one example, I would use Marco is manufacturing. Manufacturing was fairly weak in 2021. So think about the growth that we had. Manufacturing did not contribute much to that. Then why, why is enormous supply chain issues and in really many, many aspects of different manufacturing, whether that's for the chips for the autos, etcetera.

And when the number of units aren't able to be sold at the pace that they want, not that they don't have sales, but they're not able to achieve and close, because they can't deliver a vehicle or what have you. Then on the manufacturing side, we think that the manufacturing side will pick up likely the second half of the year, not the first half.

As the supply chain begins to get more improved, we'll see what the current crisis over in Eastern Europe means but our certain forecast at the moment is that that starts to improve during the back half of the year, and that will help on manufacturing. So if it helps on manufacturing that will free up spending.

And that is a category, an industry category that normally spends on digital transformation and technology and has slowed because of the supply chain. So that's one example. The second example, if you want to flip it on the other side, if you look to the U.S.

with the latest infrastructure, bills that were passed, and spending that's to occur, and then some of the spending categories, we are hearing now from the energy and utility clients, on they are getting an influx of dollars.

And of course, they want to understand how they could best utilize that money, some of which has to be spent on a certain 12-month period of time, or they lose it. And so we are helping them think about projects that can enhance their business.

And so on that side of the equation, we might see the energy and utility categories increase as a result of that. And of course, we have the whole oil situation on top of that. So those are a couple of examples Marco on how we see that things could accelerate in a couple of few industry segments that let's say were not as robust last year as others..

Got it. Excellent color.

And then I don't know if I missed this, but what was the headcount at the end of the year, and wage inflation? I know it's kind of asked by the last caller, but I'm not sure I heard a specific answer, but how are you sort of thinking about how to model that through fiscal 22? And are you seeing that that wage inflation impact that most people are seeing?.

Well, let me just touch on wage and then Bert will get you the headcount number here. Look clearly, there's a bit of wage inflation.

We look at it as a combination, though of not only kind of quote, cash compensation, but we have utilized stock as a way for retention, recruiting and having an ownership mindset in our firm, and it has worked out extremely well, to ensure that our attrition rates are substantially lower than the industry average.

And we think those areas plus kind of work that we do are all the most important from that standpoint. We are seeing more wages increase in India than we have elsewhere. Our India wage increase would probably be around 8% for the year. But I would remind you that that is off of a fairly low base salary, if you will.

So 8% of that is certainly different than an 8% in Europe or the U.S. So that's how we look at it. We're managing it well with all of our teams and in some combination of all of all of that. So I don't know if you've found the number yet..

Yes, we ended the year with about 1350 colleagues. And that was up about 80 colleagues for the year..

Got it. Very helpful. Thank you guys for your time. I really appreciate it..

Thanks, Marco..

And ladies and gentlemen, this does conclude your question-and-answer session today. I'll turn the call back over to Mike Connors for closing remarks..

Well, let me just close by saying thank you to all of our professionals worldwide for your dedication to our clients and for delivering our record, fourth quarter and full year results.

There has been no letup in our passion for delivering the best advice and support to our clients, as they continue on their digital journeys, and I couldn't be prouder of our team. And thanks to all of you on the call today for your continued support and confidence in ISG. So stay safe everyone, and have a great rest of the day..

Ladies and gentlemen. I'm sorry, please go ahead..

Just one, just one parting comment for those either working on your models, because we didn't we really didn't touch on the subject. But we do expect our tax rate, effective tax rate to be somewhere higher in 22 call it near 50. I mean, you've seen, you are seeing the rate, which is somewhere in the in the mid-30s.

And that's a consequence of some deferred taxes from 21 to 22. And, and so just as you prepare your models, just think that think about that as well as the comment that that Mike made around Q1 headwinds in terms of currency..

Ladies and gentlemen, this does conclude your conference for today. Thank you for your participation. And you may now disconnect..