III — Information Services Group, Inc.

Summary of Information Services Group (ISG) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Revenue: $61.2 million, up 6% year-over-year, at the top end of guidance.
• Adjusted EBITDA: $8.1 million, a 24% increase from the prior year, with an EBITDA margin of 13.2%, up nearly 200 basis points.
• Full Year Revenue: $245 million, up 7%, with adjusted EBITDA exceeding $32 million, up 28%.
• Recurring Revenue: $112 million for the year, accounting for 46% of total revenue, with a 13% increase globally.
• Operating Cash Flow: $29 million for the year, up 46%.
• Net Income: $2.6 million for Q4, down from $3 million in the prior year, impacted by a prior year gain from divesting an automation unit.

2. Strategic Updates and Business Highlights

• AI Growth: Nearly 35% of Q4 revenues derived from AI-related services, up from 10% a year prior, indicating strong client interest in AI-centered transformation services.
• Acquisition of AI Maturity Index: A benchmarking platform aimed at assessing AI readiness, expected to open new client discussions.
• AI Acceleration Unit: A dedicated team formed to enhance AI capabilities and client engagement, targeting a revenue contribution increase from 30% to 50%.
• ISG Tango: The platform now manages over $25 billion in total contract value, with significant growth in mid-market engagement.

3. Forward Guidance and Outlook

• Q1 Revenue Guidance: Expected between $60.5 million to $61.5 million, with adjusted EBITDA between $7.5 million and $8.5 million, indicating continued growth.
• Market Position: Despite macroeconomic uncertainties, ISG is well-positioned to capitalize on demand for AI-led transformation, with expectations for growth in the U.S. and Europe.

4. Bad News, Challenges, or Points of Concern

• Asia Pacific Performance: Q4 revenues declined by $1.1 million year-over-year, with a need for public sector spending to improve for a return to growth.
• Cautious Client Spending: Clients are remaining cautious in a volatile macro environment, which may extend sales cycles and affect revenue timing.
• Mixed Demand Visibility: Some projects have been pushed from Q1 to Q2, reflecting uncertainty in the market.

5. Notable Q&A Insights

• Client Spending Trends: A mix of offensive and defensive spending strategies observed across sectors, with consumer and retail being more defensive.
• AI Readiness: The AI Maturity Index is serving as a valuable tool for client engagement, with early indications of interest from around 30 clients.
• Labor Supply Concerns: ISG is confident in its ability to meet AI demand through ongoing training and a stable workforce, although attracting new talent remains a focus.
• Recurring Revenue from AI: AI-related projects are becoming increasingly integrated into recurring revenue streams, particularly in governance and research.

Overall, ISG demonstrated solid financial performance in Q4 2025, driven by strong growth in AI-related services and recurring revenue, while navigating challenges in certain regions and client spending behaviors. The company remains optimistic about future growth opportunities, particularly in AI transformation.