Information Services Group, Inc.

Good morning and welcome everyone to the Information Services Group first quarter 2025 conference call. This call is being recorded and a replay will be available on ISG's website within 24 hours. Now I would like to turn the conference over to Barry Holt for his opening remarks and introduction. Please go ahead.

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 first quarter conference call. I'm joined today by Michael Connors, Chairman and Chief Executive Officer, and Michael Sherrick, Executive Vice President and Chief Financial Officer. Before we begin, I'd like to read a forward-looking statement. It's 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 8K that was furnished last night to the SEC and the risk factors section in ISD's Form 10K covering full-year results. You should also read ISD's annual report on Form 10K and any other relevant documents, including any amendments or supplements to these documents, filed with the SEC. you'll be able to obtain free copies of any of IHC's SEC volumes on either IHC's website at www.ihc-1.com or the SEC's website at www.sec.gov. IHC undertakes no obligation to update or revise any forward-looking statement to reflect subsequent adventure circumstances. During this call, we will discuss certain non-GAAP financial measures which IHC believes improves the comparability of the company's financial results between periods and provides the greatest transparency of key measures used to evaluate the company's performance. The non-GAAP measures, which we will touch on today, include 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 through the most closely applicable GAAP measure, please refer to our current report on Form 8K, which was filed last night with the FCC. And now I'd like to turn the call over to Michael Compton, who will be followed by Michael Sher.

Mike? Thank you, Barry, and good morning, everyone. Today we will review our strong Q1 results, including our accelerating margin, our view of the current market, and our outlook for Q2. Our momentum continues. After finishing 2024 with a strong fourth quarter, ISD began this year with an even stronger first quarter. Our execution was superb and our underlying fundamentals are in great shape. We delivered Q1 revenues of $60 million, up 5%. It's pretty results from our divested automation unit. Growth was led by our largest revenue region, the Americas, up 17%. This is the largest year-over-year growth quarter in the Americas in the last two years. During our fourth quarter call, I indicated that we expected acceleration in 2025, beginning with the Americas during the first half of the year, followed by Europe and the rest of the world later in the second half. Our results reflect that outlook. For Q1, our adjusted EBITDA was up 68% to $7.4 million, with our adjusted EBITDA margin up more than 550 basis points to 12.4%. Our enhanced profitability is the result of our improved business mix and our disciplined operating approach, including Q1 utilization up 745 basis points year-over-year. Recurring revenues continue to be an important pillar of our success. In Q1, they reached $26 million, up slightly from Q4, and represented 44% of our overall revenue. AI continues to be at the heart of everything we do, with AI increasingly embedded in all areas of technology and services. We have served more than 200 clients with AI-focused research and advisory services in the trailing 12 months, up from the 150 we noted last quarter. As AI evolves, so do our offerings. For example, last month, ISC Research published the Strategic Guide to Egentic AI for Enterprise Leaders. With our strong expertise and knowledge of the AI ecosystem, Clients continue to look for our advice and support on adopting and scaling AI across their organizations. Our AI-powered platforms also continue to gain traction with clients. For example, more than $9 billion of contract value now flows through ISC Tango, our groundbreaking sourcing platform launched last year. That's up more than 30% from the fourth quarter. Looking at the broader market, we see a growing number of clients accelerating their cloud adoption, modernizing their infrastructure, and leveraging AIOps to improve their IT operating efficiency. This plays right to ISP's strengths in digital transformation and cost optimization, powered by AI enforcement. Today's market landscape presents both challenges and opportunities for organizations to maintain competitive momentum. We are in a great position to turn market disruption into long-term advantage for our clients. By optimizing through AI, future-proofing partner ecosystems, and rigorously tracking ROI, we help our clients achieve cost efficiencies while protecting strategic growth initiatives.