Information Services Group, Inc.

Good morning and welcome to the Information Services Group First Quarter 2026 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. Will Thortz for his opening remarks and introductions. Mr. Thortz, please go ahead.

Thank you, operator. Hello and good morning. My name is Will Thoris. I am head of corporate communications for 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 would like to read a forward-looking statement. It is 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 factor sections of our most recent Form 10-K and 10-Q filings. You should also read ISG's annual report on Form 10-K and any other relevant documents, including any amendments or supplements to these documents filed with the SEC. You will 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 statement to reflect subsequent events or circumstances. During this call, we will discuss certain non-GAAP financial measures which ISG believes improves the comparability of the company's financial results between periods and provides for a 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 in isolation or as a substitute for financial results prepared in accordance with GAAP. For the reconciliation of all non-GAAP measures presented to the closely applicable GAAP measure, please refer to our current report on Form 8K, which was filed last night with the SEC. And now I would like to turn the call over to Michael Connors, who will be followed by Michael Sherrick. Mike?

Thank you, Will, and good morning, everyone. Today we will review our strong Q1 results, our compelling AI transformation story, our view of the broader demand environment, and our outlook for Q2. ISG had a strong first quarter and an excellent start to the year, continuing our momentum. Our Q1 results, both revenue and EBITDA, were at the top end of our guidance. Revenue was $61.2 million, up 3%, led by 25% growth in Europe and 9% growth in recurring revenues, powered by our research, public sector, and governance businesses. In terms of profitability, Q1 marks the sixth quarter in a row that our adjusted EBITDA has grown by double digits. Versus the prior year, it was up 12% to $8.3 million, and our adjusted EBITDA margin was up more than 100 basis points to 13.5%, fueled by a more profitable business mix and our strong operating discipline. Now, a few comments. on our AI transformation story. AI demand continues to accelerate for ISG. In Q1, we delivered $21 million of AI-related revenue, about a third of our firm-wide total. That was up from $12 million a year ago. AI-related revenue includes work where AI is a key part of the client solution, including AI research and insights, AI strategy, sourcing governance, operating model design, business case validation, software, tech provider evaluation, and transformation support. AI and the cost optimization initiatives that fund digital transformation remain leading areas of client investment, and that plays to our strengths. Apart from AI-driven solutions, we are leveraging AI in our own client delivery model to improve speed, quality, and efficiency, thereby supporting margin expansion over time. Our recently launched ISG AI Index underscores how the AI market continues to develop. Initial spending is concentrated in infrastructure as hyperscalers ramp up capacity to meet demand. Software and platform providers are beginning to monetize their AI capabilities, while managed services is still in the early stages, indicating the larger opportunity remains in front of us. As AI demand rises, so does complexity. It's in these periods of disruption, especially, that clients turn to ISG for our independent, trusted advice. Each year, we influence more than $200 billion of tech spend. This activity informs our advisors and researchers, expands our benchmarking data, and delivers data-driven insights and recommendations our clients depend on for their AI-powered business transformations. While AI adoption is still in the early stages, pilots are progressing into broader deployments. We expect this to translate into sustained demand and a growing pipeline of opportunities for ISG. One of the highlights of Q1 was the signing of our largest deal ever, a multi-year agreement valued up to $17 million to provide governance services to a top global manufacturer. Under this landmark contract, ISG will manage $300 million in global technology spend, with $200 million technology vendors to support a large-scale, multi-year AI-powered transformation. This work is beginning, and we expect to support this client for up to eight years on this AI-centered client initiative. One comment on our ISG Tango. We continue to deliver great value through our proprietary, AI-powered, next-generation sourcing platforms. More than $27 billion of contract value is flowing through Tango, which is now fully integrated into our workflows and has become integral to our sourcing business. Now, turning to our regions, the Americans delivered $40 million of revenue in Q1, down about 3% from last year against a tough compare, and up 4% sequentially from the fourth quarter. Our current America's pipeline is robust, and we expect solid year-over-year growth in Q2. During the first quarter, the region saw double-digit growth in research and governance, and in our health sciences, insurance, and public sector industry verticals. Key client engagements included Estee Lauder, ExxonMobil, and the state of Arizona. During the quarter, we began work on a $5 million engagement with a leading U.S. healthcare company to deliver technology, cost savings, and AI-driven innovation with the goal of improving patient care. We are providing a full range of services, including benchmarking, operating model design, sourcing, transition, change management, and governance services. This is one of the largest ever technology transactions in the U.S. healthcare sector, where there is increasing demand to modernize and digitize care, pointing to a great future opportunity for ISG. Also within this sector, we continue to deliver a multi-million dollar series of engagements for a global healthcare and medical products company, involving sourcing, governance, network, and software. We are also supporting the client's shift to agentic AI, which we expect will lead to follow-on work as the client accelerates its AI adoption. Our Europe region continued its momentum from the second half of last year with an excellent first quarter. Revenues were up 25% to $17 million, driven by double-digit growth in our advisory, software, and governance businesses, and in our consumer, insurance, and health sciences industry verticals. Key client engagements in Europe in the first quarter included Allianz, Diageo, and Barmer, a leading health insurer in Germany. During the quarter, we won a large engagement worth about $1 million with a welcome back client, a leading medical technology company. We are supporting a broad range of infrastructure and software initiatives for the client, aimed at optimizing cost and adopting AI with room for follow-on opportunities. We also want a $3 million engagement with a leading pharmaceutical company, a new client for the firm. We are delivering software advisory support and executing on an enterprise-wide technology sourcing and vendor consolidation strategy. involving AI ops and proprietary AI platforms. The goal is to free up savings for the client to reinvest in its research and development activities. As you can see from these examples, this was a big sales quarter for ISG in the health sciences sector, both in the US and in Europe. In Asia Pacific, our Q1 revenues of $4.1 million were down $700,000 compared with the prior year. Based on our current pipeline, including public sector work, we expect Q2 revenues to be up 20% sequentially. In Q1, we saw double-digit growth in our consumer and enterprise industry verticals. Key clients in the quarter included IMO and Woolworths. During the quarter, we continued our work on a new, nearly $1 million engagement, with a provider of data center services to power the region's ongoing adoption of AI. ISG is helping the client build out its core AI capabilities to support its rapid growth plans. Now turning to the broader market and our guidance for Q2. Clients continue to focus on cost optimization and AI investments, despite uncertain macro conditions. And this plays to our strengths. We see current demand trends continuing into Q2. With this in mind, for the second quarter, we are targeting revenues of between $62.5 and $63.5 million and adjusted EBITDA between $8 and $9 million, which will continue our year-over-year growth and margin expansion. Now let me turn the call over to Michael Sherrick, who will summarize our financial results. Michael?