Information Services Group Inc. Q1 FY2026 earnings call

We will review strong Q1 results, AI transformation story, broader demand environment, and Q2 outlook. ISG had strong Q1 with revenue at top end of guidance. AI demand accelerates, $21M of AI-related revenue in Q1, up from $12M y-o-y. Leveraging AI in own client delivery model. Launched ISG AI Index. Signed largest deal ever, $17M multi-year agreement for governance services. Americas had $40M revenue in Q1, down ~3% y-o-y but up 4% q-o-q, current pipeline robust for Q2; Europe revenues up 25% to $17M driven by advisory, software, governance businesses and industry verticals; Asia Pacific Q1 revenues $4.1M, down $700,000 y-o-y, expected 20% q-o-q growth in Q2. Continue to deliver value through ISG Tango with over $27B contract value flowing through.

ISG's Q1 revenue was $61.2 million, up 3%. By region, Americas delivered $40 million in Q1, down ~3% y-o-y but up 4% q-o-q from Q4; Europe revenues were up 25% to $17 million; Asia Pacific Q1 revenues were $4.1 million, down $700,000 y-o-y. recurring revenues grew 9%. Adjusted EBITDA was $8.3 million, up 12% y-o-y, and adjusted EBITDA margin was 13.5%, up over 100 basis points y-o-y. AI-related revenue was $21 million, about a third of firm-wide total, up from $12 million a year ago.

For Q2, targeting revenues between $62.5 and $63.5 million and adjusted EBITDA between $8 and $9 million, which will continue year-over-year growth and margin expansion.

This communication may contain forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. For a more detailed listing of risks, refer to forward-looking statement in Form 8K and risk factor sections of Form 10-K and 10-Q filings.

Q: Please go ahead on the new client and pipeline of similar size deals.

A: The major manufacturing company's large AI governance deal is a hot topic, there are multiple discussions and pipelines regarding governance services, and AI governance is a hot area in the next couple of years.

Q: Regarding guidance, why is the Q2 guidance as it is compared to last year?

A: There's no specific single item driving it, due to uncertain macro environment and being conservative early in May.

Q: On Europe's welcome back customers, is there an increase in pipeline?

A: Welcome back clients refer to those not working with us in the last 24 months, different segments are affected by environment, and Europe's health sciences area is driven by AI and need for acceleration.

Q: For the large client contract, is it about professionalizing or still teaching clients?

A: It's both, some clients are in early stages of developing AI roadmaps and others are at different stages of AI journey.

Q: On mid-market and AI expanding work companies, how?

A: Mid-market ($1 - 10B revenue) is a sweet spot, Tango platform and AI Maturity Index help penetrate it as they lack talent and face AI complexity.

Q: On APAC government situation?

A: APAC pipeline is strong including public sector, expected 20% q-o-q growth in Q2 driven by federal spending increase.

Q: Economics of $17M governance contract and when it contributes?

A: Structured with implementation and then fixed fee contract, roughly $2M per year, starts contributing toward end of Q2 and begins to be annualized in Q3.

Q: What's the recurring revenues percentage?

A: Around 47%, approaching 50%.

Q: Feedback and expectations on ISG AI Index?

A: Launched to cover three areas, feedback is great, used to put structure around market noise.