Information Services Group Q4 Earnings Call Highlights

Information Services Group (NASDAQ:III) reported fourth-quarter results it described as a strong finish to 2025, citing accelerating client demand for AI-centered transformation work, double-digit growth in Europe, and higher profitability driven by a more favorable business mix and operating discipline.

Fourth-quarter results and profitability

ISG posted fourth-quarter revenue of $61.2 million, up 6% from the prior year and at the top end of its guidance range. Management said currency provided a positive $1.3 million impact to revenue in the quarter.

Adjusted EBITDA rose 24% to $8.1 million, and the adjusted EBITDA margin increased to 13.2% from 11.3% a year earlier, a gain of 189 basis points. Operating income was $5.1 million for an operating margin of 8.4%.

On a GAAP basis, net income was $2.6 million, or $0.05 per diluted share, compared with $3.0 million, or $0.06 per diluted share, in the year-ago quarter. CFO Michael Sherrick noted the prior-year quarter included a $2.3 million net gain on the sale of the company’s automation unit; excluding that gain, fourth-quarter 2024 net income would have been $0.7 million and GAAP EPS would have been $0.01.

Adjusted net income in the fourth quarter was $4.0 million, or $0.08 per diluted share, compared with $3.0 million, or $0.06 per diluted share, a year earlier.

Full-year performance and cash flow

For the full year, ISG reported revenue of $245 million, up 7% year over year, led by 11% growth in the Americas. Management emphasized the comparison excludes 2024 results from the divested automation unit.

Adjusted EBITDA for the year exceeded $32 million, up 28%, with a full-year adjusted EBITDA margin of 13.2%, up 300 basis points. Operating cash flow was $29 million for the year, up 46% from the prior year.

ISG ended 2025 with $28.7 million of cash, flat sequentially and up $5.6 million from the prior year. During the fourth quarter, the company paid $2.2 million in dividends and repurchased $2.3 million of stock. Sherrick said the next quarterly dividend is scheduled for March 26 for shareholders of record as of March 20.

At quarter end, fully diluted shares outstanding were 50.5 million, down 100,000 from the prior year. The company’s gross debt-to-EBITDA ratio was just under 1.9x, down from 2.4x at December 31, 2024 and below the company’s stated 2.0x to 2.5x target range. ISG’s average borrowing rate in the quarter was 5.8%, down 125 basis points year over year, and debt was unchanged at quarter end.

AI mix grows; new initiatives and acquisition

CEO Michael Connors said client interest in AI-centered transformation services continued to power growth. He said nearly 35% of fourth-quarter revenue came from AI-related Research and Advisory services, and for the full year, AI-related revenue was nearly 30%—which he said was up threefold from 2024. Connors described AI as increasingly mainstreamed within ISG’s broader technology transformation work, with clients seeking data engineering, governance, and operating-model change to support adoption.

ISG outlined several AI-focused initiatives:

• AI Maturity Index acquisition: Connors said ISG acquired the AI Maturity Index in January, describing it as an AI readiness benchmarking and intelligence platform focused on assessing workforce readiness. In Q&A, Connors said the tool is being used as a “door opener” for AI services, noting roughly 30 clients in the pipeline tied to the offering, while cautioning it is early to draw industry- or geography-specific patterns from initial assessments.
• AI Acceleration Unit: ISG formed a dedicated team in January to drive expansion of AI initiatives. The unit is led by Chief AI Officer Steve Hall and includes experts from Advisory, Research, and change management.
• AI revenue target and workforce readiness: Connors said ISG is targeting an increase in AI-related revenue to 50% from about 30% currently. In response to questions on staffing, he said the company has upskilled its workforce and expects advanced training for client-facing staff to be completed by the end of April. Connors also said turnover remains below industry averages and that the company feels it can attract supplemental talent as needed.

Connors also highlighted ISG’s “autonomy-level pricing model,” which he said offers clients a new way to value work based on the degree of AI effort applied to a task.

Regional results and notable client activity

In the Americas, fourth-quarter revenue was $38.3 million, up 1% year over year. Connors said results were driven by double-digit growth in Research and governance as well as in consumer and enterprise verticals. He cited Baxter, AGCO, and Marriott as key engagements. Connors also described a multi-million-dollar engagement with a consumer products company supporting a next-generation global business services program leveraging AI, with a stated goal of reducing operating costs by 40%. He also referenced more than $1 million in revenue from an AI-driven technology sourcing engagement with a U.S. hospital network that he said is expected to deliver savings of more than $130 million, or 20% of operating costs.

Europe posted fourth-quarter revenue of $19.1 million, up 28% year over year, driven by double-digit growth in Advisory, Software, and Research and strength in Consumer Health Sciences, Manufacturing, and Public Sector verticals. Connors cited Manpower, American Express, and Roche as key engagements and discussed multiple million-dollar-plus engagements, including work for a multinational “at the heart of the AI industry” across tech service management, workplace benchmarking, hybrid cloud sourcing, and software. He also described a complex multi-region software advisory engagement expected to generate $15 million in annual savings for a client while aligning AI consumption with demand.

Asia Pacific revenue was $3.9 million, down $1.1 million from the prior year. Management said the region saw double-digit growth in the insurance vertical but continues to depend on a rebound in public-sector spending to return to historical growth patterns, which it expects later in the year. Connors cited Singtel Optus, the Singapore Exchange, and Resolution Life as key clients and noted a million-dollar engagement with a large Australian retailer tied to an AI-driven transformation and selection of a BPO provider to modernize finance operations and HR functions with AI-enabled business processes.

Demand environment and Q1 outlook

Connors said clients remain cautious amid macroeconomic uncertainty but continue to invest in AI-related transformation, cost optimization, and planning. In Q&A, he described a mix of “defensive” and “offensive” spending that varies by industry, noting activity across consumer/retail, financial services, energy/utilities, and health sciences. He added that some U.S. work has moved from the first quarter into the second quarter, citing factors such as tariffs and geopolitical issues that can affect buyer behavior, while saying the pipeline remains strong and that 2026 should see acceleration as the year progresses.

For the first quarter, ISG guided for revenue of $60.5 million to $61.5 million and adjusted EBITDA of $7.5 million to $8.5 million.

ISG also provided additional detail on ISG Tango, its AI-powered sourcing solution. Connors said the platform now runs more than $25 billion in total contract value, up from $7 billion in the prior year, and explained that a portion of that activity comes from the mid-market. He said digitizing the sourcing process can shorten timelines for clients and provide greater certainty of outcomes for service providers participating in bids, while allowing ISG to deploy talent more flexibly across engagements.

About Information Services Group (NASDAQ:III)

Information Services Group, Inc (ISG) is a leading global technology research and advisory firm specializing in digital transformation, sourcing strategies and technology-driven business operations. Headquartered in Stamford, Connecticut, the company leverages deep market insights and data analytics to help clients optimize cost structures, accelerate growth and navigate complex technology landscapes. Since its founding in 2006, ISG has cultivated expertise across industries including financial services, healthcare, manufacturing and the public sector.

ISG’s core offerings include sourcing advisory, managed governance, market intelligence and research services.