Information Services Group, Inc.

Good morning and welcome everyone to the Information Services Group 7th Quarter 2025 conference call. This call is being recorded and the replay will be available on ISG's website within 24 hours. Now, I'd like to turn the call over to Mr. Barry Holt for his opening remarks and introduction. Mr. Holt, 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 IST's second 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 IST 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 naturally 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 factor section in our Form 10K covering full-year results and our Form 10Q covering first quarter 2025 results. You should also read IAC'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 ISG's SEC filings on either ISG's website at www.isg-1.com or the SEC's website at www.sec.gov. ISG undertakes no obligation to update or revise any forward-looking statements or reflect subsequent events or circumstances. During this call, we will discuss certain non-GAAP financial measures, which ISD believes improves the comparability of the company's financial results with some imperatives and provides for greater 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 an isolation or as a substitute for financial results prepared in accordance with GAAP. For the reconciliation of all non-GAAP measures presented to the most closely applicable GAAP measure, please refer to our current report on Form 8K, 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 Michael Sherriff. Mike?

Thank you, Barry, and good morning, everyone. Today we will review our outstanding Q2 results, accelerated by our pivot to AI, our acquisition of Martino and Partners in Italy, our view of the current market, and our outlook for Q3. Our team executed extremely well, and ISD delivered an excellent second quarter, demonstrating our ongoing momentum with clients and our solid fundamentals. We delivered Q2 revenues of about $62 million, up 7%, excluding results from our previously digested automation unit. Growth was led by our largest revenue region, the Americas, up 16%. Our adjusted EBITDA was up 17% to $8.3 million, with our adjusted EBITDA margin up 240 basis points to 13.5%. Our enhanced profitability is the result of our improved business mix, disappointment operating approach, and sound execution of our strategy. We also had an excellent cash quarter, producing nearly $12 million in cash, one of our best quarters ever for cash generation. Recurring revenues continue to be an important pillar of our success. In Q2, they reached $28 million. up 7% sequentially, and represented 45% of our overall revenue. Our AI-centered approach is resonating with our clients. In Q2, our AI-related revenue was 2.5 times higher than it was a year ago. And in both the second quarter and first half, nearly 20% of our total revenue was AI-related. We served more than 350 clients with AI-centered engagements in the second quarter, and that's up 50% from Q1. Further demonstrating the market's interest in AI, we produced two sold-out AI Impact Summit events in Q2, one in Boston and the other in Frankfurt, Germany, and we have three more slated for the second half. We also published our State of Agenic AI Market Report, which has become our most downloaded research report ever. These autonomous AI systems are taking the market by storm and are now a significant aspect of most of our client engagement. We continue to leverage AI to expand the capabilities of our ground-based rating sourcing solution, ISG Tango. More than $11 billion of total contract value now flows through the platform, and that's up 20% from Q1. As expected, IFC Tango has opened up the mid-market to us, increasing our total addressable market. Over the years, IFC has grown through our enduring and trusted client relationships, our innovation, and our commitment to excellence. We have also grown by expanding our capabilities in geographic reach through a series of Puckian acquisitions. As noted in our earnings release, we have signed a definitive agreement for our latest acquisition, Martino and Partners, a highly respected advisory firm based out of Milan, Italy, focused on recurring revenue streams in the public sector. This transaction represents a further investment in our European business and we expect it to close in early September. Italy has emerging growth potential fueled by EU-funded programs aimed at technology modernization and a focus on AI and cost optimization. With the acquisition of Martino and Partners, we'll add more than 20 new clients, expand our public sector reach beyond the central government, to serve municipal entities with recurring revenue contracts and gain a stronger presence in northern Italy where many leading commercial enterprises are located. We also add to our leadership bench with co-founder Andrea Martino, slated to become CEO of our combined ISG Italy business. Overall, our momentum continues, even as Europe remains a bit cautious. Uncertainty has become the norm but enterprises are adjusting and moving forward. Two market factors are driving our performance. One, clients are riding the AI wave and investing aggressively in modernizing their technology operations and infrastructure to support it. This includes enhancing their data management capabilities as they prepare for broad-scale adoption of AI across their businesses. We prepared for this last year and are seizing the moment. Two, to fund these investments, clients remain focused on cost optimization. They continue to look to us to help them manage their cloud infrastructure and software costs. By tapping into our broad ecosystem expertise, and our growing software research and advisory capabilities. Our towering strength is helping clients optimize their use of technology to drive greater efficiency. Combined with our all-out effort on AI, it is a powerful one-two punch. So we are well-positioned, and we look forward to continuing our success in the second half. With that, let me turn to our regents. The year-over-year comparisons I cite here exclude revenues of about $7 million from our divested automation unit in last year's second quarter. Our Americas region delivered another excellent quarter. Revenues were up 16% to $39 million, driven by double-digit growth in our technology advisory, network, software, research, and governance businesses. and in our consumer, energy, utilities, health sciences, and public sector industry verticals. Key client engagements during the second quarter included Three House Foods, who is a significant mid-market client, along with Centene and PSE&G. During the quarter, IXG expanded its work with a large U.S.-based national health care company. generating additional revenues of a million dollars. We are providing a range of services, including Governax software and network, to rationalize the client's tech spend and drive cost savings as part of an acquisition and divestiture of two businesses. In the energy sector, we continue to expand our business with a long-time client, a leading electric and gas utility company. During the quarter, we added 1.2 million of revenue supporting the client's SAP implementation, conducting a software assessment, and developing a data center and network strategy. Turning to Europe, this market is showing early signs of a rebound with revenues up 21% sequentially from Q1 to $16.6 million. For Q2, Europe delivered double-digit revenue growth in our banking and health sciences industry verticals. Key client engagements in Europe in the second quarter included Allianz, Volkswagen, and BASF. During the quarter, we continued to expand our work with a leading multinational healthcare company. We are helping the clients select a systems integrator for their adoption of SAP S4 HANA, as part of a comprehensive business transformation program. For another client, a leading beverage company, we are supporting a complete restructuring of their applications of space and vendor ecosystem to enhance their AI capabilities. This includes selecting a data transformation partner to support this client's long-term AI strategy. Now turning to Asia Pacific, Our Q2 revenues of $5 million were essentially flat from the prior year. Key clients from the quarter included IEMO, Endeavor Group, and Standard Charter Group. Among our Q2 engagements, we are supporting a leading Australia-based engineering services firm and selecting a finance and accounting provider while developing a broader tech change management and payroll services strategy. Now, a few words on the overall market from our perspective. The outlook for tech services spending is somewhat mixed, with strong demand in the U.S. and an improving outlook in Europe. To date, inflation does not appear to be as bad as originally feared, and tariff risks seem to be manageable. Indeed, if anything, uncertainty is breeding stronger demand for technology-led costs and supply chain optimization services, and that plays to our strengths. Looking ahead, we see interest rate cuts stimulating further tech spending in the next 12 months, with AI remaining the dominant long-term growth driver for the industry. So with that, let me turn to guidance. We expect current demand trends to continue in Q3, driven by clouds, AI, data analytics, and infrastructure modernization spending. Clients, for the most part, are not standing still. They are determined to stay ahead of the curve. For the third quarter, which includes the slower summer months in Europe, we are targeting revenues of between $60.5 and $61.5 million, and adjusted EBITDA between $7.5 and $8.5 million, which will continue our year-over-year growth and margin acceleration. Now let me turn the call over to Michael Sherrick, who will summarize our financial results.