Information Services Group(III) - 2025 Q2 - Quarterly Results

Executive Summary Second-Quarter 2025 Performance Overview The company delivered strong Q2 2025 results with revenue up 7% ex-divestiture and adjusted EBITDA up 17% Q2 2025 Key Performance Highlights | Metric | Value | YoY Change | | :--- | :--- | :--- | | GAAP Revenues (ex-divested unit) | $62 million | +7% | | Adjusted EBITDA | $8.3 million | +17% | | Operating Cash Flow | $12 million | From $2.2M | - Adjusted EBITDA margin increased by more than 200 basis points[3] Strategic Highlights and Outlook The firm is positioned as an AI-centered advisor, acquiring Martino & Partners and providing optimistic Q3 guidance - Strategic Focus: AI-centered positioning, investment in expanded AI capabilities, and long-term focus on operational excellence[5] - Acquisition: Agreed to acquire Martino & Partners, a strategic advisory firm in Italy, to expand client base, geographic footprint, and AI capabilities[4][6][7] H1 2025 Adjusted EBITDA Performance | Metric | Value | YoY Change | | :--- | :--- | :--- | | Adjusted EBITDA | ~$16 million | +36% | | Adjusted EBITDA Margin | N/A | +400 bps | Second-Quarter 2025 Financial Results Consolidated GAAP Financial Performance Q2 2025 GAAP revenues were $61.6 million, with operating and net income increasing year-over-year Q2 2025 GAAP Financials | Metric (Q2 2025) | Amount ($M) | YoY Change (Reported) | YoY Change (Excl. Divested Unit) | | :--- | :--- | :--- | :--- | | GAAP Revenues | 61.6 | -4% | +7% | | Operating Income | 4.7 | +27.0% | N/A | | Net Income | 2.2 | +7.4% | N/A | | Diluted EPS | 0.04 | 0% | N/A | - Currency translation positively impacted reported revenues by $0.8 million versus the prior year[8] Non-GAAP Adjusted Financial Performance Q2 2025 non-GAAP results showed strong growth, with adjusted EBITDA up 17% and margin expansion of 241 bps Q2 2025 Non-GAAP Adjusted Financials | Metric (Q2 2025) | Amount ($M) | YoY Change | | :--- | :--- | :--- | | Adjusted EBITDA | 8.3 | +17% | | Adjusted Net Income | 4.1 | +9.5% | | Adjusted Diluted EPS | 0.08 | 0% | - Adjusted EBITDA margin was 13.5%, up 241 basis points from 11.1% in the prior year[13] Revenue by Geography Excluding the divested unit, Americas revenue grew 16% while Europe and Asia Pacific regions declined Q2 2025 Revenue by Region (Excluding Automation Unit) | Region (Q2 2025) | Revenue (Excl. Automation) ($M) | YoY Change (Excl. Automation) | Reported YoY Change | | :--- | :--- | :--- | :--- | | Americas | 39.5 | +16% | -1% | | Europe | 16.6 | -7% | -12% | | Asia Pacific | 5.4 | -1% | -1% | Cash Flow and Liquidity The company generated $11.9 million in operating cash flow, a significant increase from the prior year Q2 2025 Cash Flow and Balance | Metric | Value | YoY Change / QoQ Change | | :--- | :--- | :--- | | Cash from Operations (Q2) | $11.9 million | From $2.2M in Q2 2024 | | Cash Balance (June 30, 2025) | $25.2 million | +25% from March 31, 2025 | - During the second quarter, ISG paid dividends of $2.4 million and repurchased $4.0 million of shares[14] Strategic Developments Martino & Partners Acquisition The company agreed to acquire Italian advisory firm Martino & Partners to expand its European presence and AI capabilities - Target: Martino & Partners, a highly respected strategic advisory firm serving public and private sector clients in Italy[6] - Expected Closing: Early September[6] - Strategic Benefits: Expands ISG's client base, geographic footprint, and capabilities in Italy (including AI); adds over 20 new clients; expands public sector reach; and establishes a strong presence in northern Italy[7][8] Outlook and Shareholder Returns Third-Quarter 2025 Guidance The company projects Q3 2025 revenues of $60.5-$61.5 million and adjusted EBITDA of $7.5-$8.5 million Q3 2025 Financial Guidance | Metric (Q3 2025 Guidance) | Range ($M) | | :--- | :--- | | Revenues | 60.5 - 61.5 | | Adjusted EBITDA | 7.5 - 8.5 | Quarterly Dividend Declaration The Board of Directors declared a third-quarter dividend of $0.045 per share Q3 2025 Dividend Details | Metric | Value | | :--- | :--- | | Dividend per Share | $0.045 | | Payment Date | Sep 26, 2025 | | Record Date | Sep 5, 2025 | Additional Information Conference Call Information A conference call to discuss Q2 results was scheduled for August 7, 2025, at 9 a.m. U.S. Eastern Time - Date & Time: August 7, 2025, 9 a.m. U.S. Eastern Time[17] - Access Details: Dial +1 (800) 715-9871 (U.S.) or +1 (646) 307-1963 (International), Access Code: 9414856. A recording will be available on ISG's investor relations page[17] Forward-Looking Statements Forward-looking statements are subject to risks and uncertainties and are not guarantees of future results - Nature: Forward-looking statements are not guarantees of future results and are subject to certain risks and uncertainties[18] - Key Risks: Failure to secure new engagements, ability to hire and retain qualified employees, management of growth, success of international expansion, competition, currency fluctuations, ability to successfully consummate or integrate strategic acquisitions, and the success of ISG's focus on AI advisory and AI-powered platforms[19] Non-GAAP Financial Measures Explanation Non-GAAP measures are provided to enhance comparability and transparency of ongoing operating results - Purpose: To enhance the evaluation of ongoing operating results by improving comparability between periods and providing greater transparency of key performance measures, excluding non-cash and certain other special charges[20] - Non-GAAP Measures Defined: Adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted EBITDA margin, and selected financial data on a constant currency basis[21] - Constant Currency Presentation: Excludes the impact of year-over-year fluctuations in foreign currency exchange rates to facilitate period-to-period comparisons of business performance[22][23] About Information Services Group (ISG) ISG is a global AI-centered technology research and advisory firm serving over 900 clients worldwide - Company Type: Global AI-centered technology research and advisory firm[25] - Client Base: Trusted partner to more than 900 clients, including 75 of the world's top 100 enterprises[25] - Expertise: Known for proprietary market data, in-depth knowledge of provider ecosystems, and 1,600 professionals worldwide, leveraging AI to help organizations achieve operational excellence and faster growth[25] Financial Statements (Unaudited) Condensed Statement of Income and Comprehensive Income This presents the unaudited GAAP income statements for the three and six months ended June 30, 2025 and 2024 Condensed Statement of Income and Comprehensive Income (Unaudited) | Metric | Three Months Ended June 30, 2025 ($M) | Three Months Ended June 30, 2024 ($M) | Six Months Ended June 30, 2025 ($M) | Six Months Ended June 30, 2024 ($M) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 61.6 | 64.3 | 121.1 | 128.5 | | Operating income | 4.7 | 3.7 | 8.1 | 1.3 | | Net income (loss) | 2.2 | 2.0 | 3.7 | (1.4) | | Diluted EPS | 0.04 | 0.04 | 0.07 | (0.03) | Reconciliation from GAAP to Non-GAAP This provides a reconciliation of GAAP net income to non-GAAP adjusted EBITDA and adjusted net income Reconciliation from GAAP to Non-GAAP (Unaudited) | Metric | Three Months Ended June 30, 2025 ($M) | Three Months Ended June 30, 2024 ($M) | Six Months Ended June 30, 2025 ($M) | Six Months Ended June 30, 2024 ($M) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | 2.2 | 2.0 | 3.7 | (1.4) | | Adjusted EBITDA | 8.3 | 7.1 | 15.7 | 11.5 | | Adjusted net income | 4.1 | 3.8 | 7.8 | 4.5 | | Adjusted diluted EPS | 0.08 | 0.08 | 0.16 | 0.09 | Selected Financial Data - Constant Currency Comparison This presents selected financial data on an as-reported and constant currency basis Q2 Selected Financial Data - Constant Currency Comparison | Metric (Q2) | As Reported (2025) ($M) | Constant Currency Impact (2025) ($M) | Adjusted (2025) ($M) | As Reported (2024) ($M) | Constant Currency Impact (2024) ($M) | Adjusted (2024) ($M) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 61.6 | 0.1 | 61.7 | 64.3 | 1.0 | 65.3 | | Operating income | 4.7 | (0.1) | 4.5 | 3.7 | 0.1 | 3.8 | | Adjusted EBITDA | 8.3 | (0.1) | 8.2 | 7.1 | 0.2 | 7.3 | H1 Selected Financial Data - Constant Currency Comparison | Metric (H1) | As Reported (2025) ($M) | Constant Currency Impact (2025) ($M) | Adjusted (2025) ($M) | As Reported (2024) ($M) | Constant Currency Impact (2024) ($M) | Adjusted (2024) ($M) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 121.1 | 1.4 | 122.5 | 128.5 | 1.7 | 130.3 | | Operating income | 8.1 | (0.0) | 8.0 | 1.3 | 0.1 | 1.3 | | Adjusted EBITDA | 15.7 | 0.0 | 15.7 | 11.5 | 0.2 | 11.8 |