Information Services Group at Small-Cap Virtual Conference: AI-Driven Growth

On Thursday, 18 September 2025, Information Services Group (NASDAQ:III) presented at the Small-Cap Virtual Conference, outlining its strategic focus on AI and technology-driven advisory services. The company, led by CEO Michael Connors and CFO Michael Scherer, highlighted its robust financial performance and growth strategy, while acknowledging challenges in optimizing recurring revenue streams.

Key Takeaways

• ISG reported a 7% revenue increase and a 17% EBITDA rise in the first half of 2025.
• The company is targeting upper single-digit revenue growth and aims for 50% recurring revenue.
• The SGTango platform enhances efficiency and reduces transaction time by 20%.
• Recent acquisition in Italy aims to expand ISG’s footprint in the public sector.
• ISG’s advisory services focus on AI integration and software optimization.

Financial Results

• Revenue grew by 7% in the first half of 2025.
• EBITDA increased by 17%, surpassing the target of 1.5 times revenue growth.
• Gross debt stands at $59 million, with a net debt of $34 million.
• The gross debt to EBITDA ratio is approximately 2 times, within the target range of 2 to 2.5 times.
• ISG has maintained consistent shareholder returns through dividends and share buybacks over the last five years.

Operational Updates

• ISG’s revenue is approaching $240 million, with 45% being recurring.
• The iSheetango platform and ISG iFlex staffing model are key operational drivers.
• ISG serves 900 clients, with 80% of next year’s revenue expected from existing clients.
• The company leverages a proprietary database for a data-driven approach, influencing over $200 billion in enterprise spending.

Future Outlook

• ISG targets upper single-digit revenue growth and EBITDA growth at 1.5 times revenue.
• The company aims to increase recurring revenue to 50%.
• M&A strategy focuses on acquiring recurring revenue streams and technology capabilities, particularly in AI.
• ISG anticipates significant AI-related revenue and spending by 2030.

Q&A Highlights

• The SGTango platform standardizes the technology deal process, enhancing margins and utilization.
• The acquisition of Martino & Partners in Italy strengthens ISG’s presence in the public sector.
• Advisory services emphasize AI integration and optimizing software spending.
• Cost optimization represents 55% to 60% of ISG’s work, with transformation projects accounting for the remainder.

For a detailed review of the conference call, please refer to the full transcript below.

Full transcript - Small-Cap Virtual Conference:

Mark Riddick, Senior Analyst, Sidoti and Company: Two. One. Hey. Good afternoon, everyone. It’s now 1PM here on the East Coast, and we’re ready to begin our next presentation.

My name is Mark Riddick. I’m senior analyst with Sidoti and Company, and I thank you for joining us on day two of the Sidoti September SmallCap Virtual Conference. Our next presenting company is Information Services Group. The ticker is the letter I three times. Joining And us today is Michael Connors, chairman and CEO and Michael Scherer, chief financial officer.

Now before we begin, just a reminder, we will have time for q and a following prepared remarks. If you’d like to ask a question, just feel free to submit those at any time by clicking on the prompt at the bottom of your screen. So no need to wait until the end of prepared remarks to do so. And with that, we can turn the floor over to ISG. Gentlemen, good morning.

Thank you. Well, good afternoon. Thank you for joining us.

Michael Connors, Chairman and CEO, Information Services Group: Thanks very much, Mark, and, thanks all to to all of you for joining us this afternoon and your interest, in ISG. So we’ll get right started. Let’s talk about who we are. We are a global, AI centered technology research and advisory firm. We’ve celebrated our nineteenth year this year.

We have 1,600, professionals around the world in 20 countries, and our work is all around, technology for the largest enterprises, around the world. We help advise them on on achieving, operational excellence and faster growth using technology, whether that’s AI, that’s cloud, what have you. We have, our revenues approaching about 240,000,000. Our recurring revenue is approximately 45% of that. And we have fantastic stickiness with our large enterprise clients with 96% advocacy for the using of ISG.

What do we do for our clients? We do four things for our clients essentially, and it’s all driven by data and a platform delivery model for our clients. First, we inform them around what is happening in technology, the use of things like AI, cloud and so forth. And just as others might use it, this is subscription based and all about emerging technology. Second, we have the best technology database in the world, and that’s why clients come back to us year after year after year.

We have a market share of greater than 50% of all sourcing technology contracts on any given year. We use a benchmark, pro benchmark platform. We also have a second platform called Inform, where we have all of our data into a black box and then we use it with our client base. Thirdly, is we provide advisory services to the C suite, to the technologist, to the chief executive officer, to the procurement officers, etc. And we help guide them through the use and most efficient use of technology.

And then we have to kind of close out the loop. We have capabilities around governance to help manage large technology contracts from the likes of Accenture or IBM or Capgemini, that might total somewhere between 50, a $105,100,000,000 dollars a year in in expense for an enterprise, we’ll help them manage that from a governance standpoint. Now our data is our differentiator. This is an area where we get data from three sources. First and foremost, all of our engagements that we work with our large enterprise clients around price, around cost, around all the components that you can imagine, around services and software.

We load that into our database. Second, we get it from a data exchange program with the largest technology providers in the world, the Accenture’s, the IBM, the Cognizant’s of the world. They want us to be fully informed about their capabilities, what they are willing to offer, so that when we’re in front of the clients at General Motors or at Bank of America or wherever, we can be able to advocate on their behalf in terms of what their services are. And then thirdly, some of the public sources that are available. We put all those together and have a very strong, very compelling and very proprietary differentiated database.

You know, our position is unique. We sit in the center. Our enterprise clients on the left of the screen, they are the ones that buy our services. The technology and service providers, the IBMs, the snowflakes, the the sales forces of the world, they sit on the right hand side wanting to sell into the enterprise. Our work is to be sure that when we’re working with our enterprise clients, so they get the most efficient, the best capabilities, both in terms of those who have done it over and over and those who may be emerging, firms that are out there that may be able to help that particular client.

All in all, we influence a little over $200,000,000,000 in enterprise spend. So we’re a big influence in the market, and that’s why clients keep coming back to us time and time again. Moving on to kind of a, the the the sandbox that we play in, managed services is a very large market. Software is a big market. You add those two together, you can see the 200,000,000,000.

The software market itself is approaching a trillion dollars. So there’s plenty of room in that sandbox. There’s plenty of very large companies in that in that sandbox. We have a relationship with all of them. We are not connected to any of them.

So we become the third party, objective adviser to the enterprise on these kinds of companies. Now, what kinds of advisory services? This is our array. We provide kind of 15 different levels of services in lots of different areas around AI, benchmarking, cost optimization, your network, software and so forth, sourcing being the largest of what we offer. But we have capabilities to support our clients in a lot of different areas.

Now let me use an example to kind of walk you through, typically how we operate with our clients. Here’s an example of a very large, client in the manufacturing sector. Their board, they spend about a billion 2 on services around procurement, supply chain, HR, finance, and IT. They asked us to come in, take a look at their spending, benchmark it against a peer group, and determine where they sit. First first quartile, middle, wherever they might be.

In this particular case, we, found that they had an opportunity to save over, you know, somewhere close to a $100,000,000. So our next step after benchmarking is to say, okay, can you take the art of the possible, create a strategy for us, and then help us execute against that strategy so that we can generate that $100,000,000 of potential savings. And so we’ll use a lot of our different capabilities around research, around software, around network, around our negotiating skills, modernizing, applications, etcetera. And in this particular case, which starts out as kind of a $500,000 engagement, over kind of a three year period of time, this client has generated $12,000,000 in fees for us. We’ve saved them nearly a $100,000,000, and we’ve generated using those savings to help them create a revenue stream that’s over a $100,000,000 for this client.

Very typical on how we go about our clients, in terms of how we serve our clients. Now, terms of the mix on our revenue, so our revenue is is is about 80% reoccurring. And what we define as reoccurring is a set of clients, we have 900 of them. The clients that we had last year, we believe will generate over 80% of our revenue in the next year. And that’s been consistent now for the last fifteen years for us.

So we know going into January 1, that 80% plus of our revenue is coming from that client base that we served in the prior year. As a subset of that, 45% of our revenue is recurring revenue. These are revenues that we know on January 1 we have contracted for. And that includes our research, our platforms, and our multi year, kind of contracts. So a very good dependable steady revenue stream for our business.

Now, here’s an example. We serve 20 different industry segments. Our objective is to get to 10 to as close to fit of the 15 largest by revenue companies in the world as our clients. Here’s six of those 20 to give you a sample. In health sciences, we have 13, energy and utilities 11, insurance 10 and so on.

Our objective then is to serve these large clients because they have the largest technology spend. And when you’re spending a 100,000,000, a billion, 3,000,000,000, some of these on here, 4 and $5,000,000,000 a year in services and software. It’s a big sandbox to play in and they’re all constantly looking for our advice and counsel on how they can efficiently use that technology. So good industries and, good growth in each of them. Now AI, we have pivoted to be an AI centered, technology research and advisory firm.

What does that mean? Well, first of all, what is happening in the market? We know that over 50% of enterprises, you would think by all the noise, it would be a 100%, but it’s a bit more than 50% of clients now are developing an AI roadmap for their business. They’re starting small. They’re doing some proof of concepts.

Most have not scaled anything yet, but we know that the planning is going on. And we expect a lot of revenue and a lot of spend happening in this area by 02/1930. Now if you take the next pick and how are we doing it, and how are we working with our clients, it’s really in three buckets. Bucket number one is in the advisory area. We’re helping our clients understand AI, what would be a strategy around it, how you can use it, and primarily around sourcing.

So if you think about the sourcing of all the services, used to be labor arbitrage. Now it’s technology arbitrage using AI and other, areas of technology to help them. And so we help them define a strategy, how you can use it, how you can interact with an Accenture or an IBM or a Capgemini. How can AI help your business become more efficient, more effective? What’s the ecosystem of companies out there that can help my particular enterprise?

The second area is how we’re focusing our research around AI. How can we do it in software? What are providers doing? What are enterprises using? What are the use cases out there that are returning a little bit of investment?

It’s still very early innings, but we’re using it in in the AI research area as well. And then for ourselves, how are we using AI? And we’re using it in our platforms, and we’re using it with our patents that we have around intelligent contracting. In platforms, for example, we have ISG Tango. Tango is our platform for all sourcing.

It’s AI powered. The way it works is that when we’re doing a transaction for a large company, whether it’s a large property and casualty insurance company, a large bank, a auto company, what have you. When we’re working on that, we have a platform. We’re putting all of the data into the platform from the enterprise. We have the technology providers or the software providers that are looking to get that business from the enterprise, use the platform.

What are their capabilities? What are they willing to put forward to that particular enterprise? And it’s a win win for all of us. It’s a win win for our enterprise client because they can get speed to value to get their savings faster. It’s a win win for the enterprise or for the technology providers, the Accenture’s, the IBM’s, because they know by using ISG in our platform, there’s going to be an outcome.

And if they win that particular outcome, they know that it’s gonna come faster than it did before, and that means more revenue to them sooner. And from an ISG standpoint, it’s the efficiency of that platform. It’s more productive for us. It’s more margin accretive for us, and it’s an ability to take that data in a central depository or repository for us. So that’s how we’re using AI at the client with research and inside, ISG.

Now, what is the competitive landscape for us? We don’t have anybody that looks like us. We have elements of what we do with different, competitive sets out there. In the research area, have companies like Gartner. We do see them in the market, and in benchmarking, Gartner’s our number one competitor around technology.

A lot of times these large technology contracts have an open clause in them halfway through their three or four year agreement. And they typically need two providers in that to open it up to do a benchmark, Gartner and ISG. That’s our main competitor there. In the advisory or the, if you will, the execution phase, this is where we’ll run into the audit firms. The Deloitte’s, the KPMG’s.

Here in The US, we run-in the PWC over in Germany. It depends geographically who we run into. And then around governance, because we have a nice platform platform that helps manage and govern these large contracts, you’ll see a lot of different smaller technology players. So it’s a competitive landscape that is is is diversified depending on the kind of elements service, but the number one competitor, that we have is the internal procurement departments of these large companies. And that’s why we tend to wanna partner with them when we’re servicing the end user.

Now, we are known as the authoritative voice in this industry. For ninety one consecutive quarters, we have done a quarterly, what we call ISG index call for the industry. On that call, we get a 1,500 people. Those people are primarily the ones that follow the large technology providers. So it’d be the analysts that follow the guard follow the Accentures or the or the, Capgeminis or the Cognizant’s of the world, as well as providers are on the on that as well as clients.

And what we do is we give them the state of the industry. What’s happened in the quarter? Who are the winners? Who are the losers? Who are winning contracts around, applications or infrastructure or network?

What is happening with AI? And we give a report on that and we put that report on our website. Vulture is important for us. We have, one of the lowest turnovers, in any professional services firm. We do it because we have great work.

It’s creative. It’s innovative. It’s a broad set of clients in multiple industries. We give them total flexibility. We build our business on a virtual model back in 2006 when I launched the firm.

We don’t have a lot of real estate expense. People love the flexibility to work at clients or work from home. It’s worked out great. Of course, COVID hit. We were already very well aware of how to manage and a knowledge network system to have people work together in a virtual environment, and we get lots of different awards.

So with that, I’m gonna turn it over to Michael to kinda walk you through it and summary our growth plan and some of our financials. Michael?

Michael Scherer, Chief Financial Officer, Information Services Group: Hey. Thank you, Mike, and and good afternoon, everyone. Mike just took you through really our overall market positioning. What I wanna do is now translate that into how does it impact and drive our financial performance. And so I’m gonna start with our overall growth plan growth plan.

And I’m not gonna drain the whole slide. I’m gonna hit on a couple of key points here in terms of the drivers. One is clearly the recurring revenue streams that we have that Mike talked about. That gives us tremendous visibility, and it gives us a base as we begin each year, each quarter of revenue. The other I wanna just hit on is iSheetango.

You know, Mike mentioned that this is one of our newer and most impactful platforms that we have. It’s really opening up opportunities for us and enabling us to change how we deliver, how fast we deliver, and the teams that we can put on our engagement. So that’s been a really important one that is an underpinning of of our growth. And then lastly, really at the bottom is what we’ve always called ISG iFlex, and that is, you know, we’ve always been a remote organization even pre COVID. We have a flexible staffing model that allows us to staff engagements globally, from anywhere.

So if we have capacity in Germany and we have a need in The US, we can staff that resource on that. And that, again, is another piece that has really helped us to be able to deliver and to drive growth. And when you take all of these together, it fuels and drives our overall objective, which is upper single digit revenue growth translating into EBITDA growth at about one and a half times, revenue, and, again, to strive towards the recurring revenue at 50%. So three really great underpinnings to our financial performance. If I look then at the actual results, and I’m gonna look at 02/2025, year to date, and, obviously, these are through the first half, you’ll see that our revenue grew 7% in the first half of the year.

Our EBITDA was up 17. So we achieved our our upper single digit revenue growth, and we achieved far more than the one and a half times in terms of the flow through. We credit, a lot of that to Tango, which was launched about twelve, eighteen months ago, and the effects that’s had on our utilization, we’ve seen great great improvement there. One of the other things we get asked about a lot is, obviously, we generate a a good amount of cash flow, and what we do with that cash loan. We obviously have a pretty balanced approach as we look at m and a, we look at dividends, we look at share repurchase.

What this chart really shows you is just the consistent shareholder returns we’ve had over the last, really, five years via the dividend and share buybacks. And we’re particularly proud of that and pleased with it, and we would expect for that to continue as we go forward as we look at ways that we deploy our excess cash. On capital structure, I’m very much pleased with this. I mean, over the last two years, we’ve made a put a lot of effort behind the balance sheet, driving cash flow, reducing our leverage. As you can see from here, as of last quarter, we had gross debt of 59,000,000, net of 34.

That gross debt level is about two times debt to EBITDA, which is right at the bottom of our two to two and a half range. So we’re we’re very comfortable and very pleased with that. And we’ve had very good operating cash flow generation year to date. And I can I can tell you that we are very much focused on continuing that as we push into the second half of the year? So lastly, as we wrap, just I would give you these five sort of key points, for the investment thesis as you take away from this presentation.

One is, as Mike really highlighted, we have a very unique and leading market position. Right? And that position is supported by what we call our data moat. Right? That proprietary industry data that really differentiates us from the peer set and and really provides us with an offering that others cannot deliver.

We have great market, permission, you know, 96% advocacy. Mike showed the reoccurring revenue at 80%. I mean, these are very strong endorsements from our clients that come back and do business with us year in and year out. As I highlighted, you know, we have a growth plan in place, recurring revenues, tango, our overall, you know, transformation work in enterprise. So we have a lot of growth drivers, a lot of offerings, that we believe continue to have strong relevancy in the market and will drive our growth.

And then lastly, as I noted, we have the track record and and and and history of a prudent use of capital, dividends, buybacks, selective m and a, to create shareholder value. So, hopefully, that gives you a better sense of us and why we’re excited about the story. With that, I will, turn it back to Mark to open it up for any questions.

Mark Riddick, Senior Analyst, Sidoti and Company: Thank you very much. And as a reminder, if you’d like to, ask a question, just click on the q and a prompt at the bottom of your screen. Why don’t we I I will start us off with with this. Maybe the the the strength of Tango maybe has been one of the things that has been a little underappreciated, I think, with the with the the ISG story. And and maybe you can spend just a little bit of a of a couple of moments talking about the the competitive advantages and and the benefit to, to the folks that have signed up with Tango and and sort of what it does for them and and how it’s really benefited.

Michael Connors, Chairman and CEO, Information Services Group: K. Great. Thanks, Mark, for that question. So, again, just to level set, SGTango is our sourcing platform that we use with enterprises and technology, suppliers in order to come to a technology deal. And the advantage of using this platform is a, it’s standardized.

So now the enterprise knows how it operates. All of the technology suppliers who are vying for business with that enterprise know that it’s standardized. All the data goes into the platform, and by going into the platform, then we can have full transparency as to what the current cost base is versus what a a technology provider might be willing to, to provide going, going forward. And so the advantages to the enterprise is that it’s all in one place, number one. Two, their speed.

So the ability for them to get their cost savings will be faster. As an example, normally, something that would have taken sixteen weeks, we can get about 20% of that time off. It would come in thirteen weeks. So you’re getting your savings as a client maybe three weeks earlier, maybe a bit more. From the from the technology provider who is participating in putting their data into the platform, what they get is they get standardization from ISG.

They get the ability to know that there will be an outcome because they’re using the platform. And if they win, then they are also going to have speed for their revenue. They’re gonna get their revenue sooner and they’re gonna have certainty about what that revenue is. And then from ISG, our advantages here clearly is that it’s sufficient to put all the data together that we can then extract for our database. Second of all, for us, it’s much more efficient and productive.

If we can do something at a fee of a million dollars in thirteen weeks versus sixteen weeks, then our margins are being enhanced and you’re seeing that with margin acceleration in our business. And thirdly, the utilization of our talent is good. Instead of spreading their time over sixteen weeks, you spread it over thirteen. They’re more efficient, and you’re seeing that in our utilization results. So it’s a win for the client, a win for the technology provider, and a win for ISG, Mark.

Mark Riddick, Senior Analyst, Sidoti and Company: Excellent. Thank you for that. And then one of the things that, I did wanna touch on, is one of the potential uses of cash, is m and a. You did make an announcement of, Martino and and and partners when you reported around two q results. Maybe you could talk a little bit about that, opportunity and, sort of how that frames to some of the potential targets you may have, in in mind going forward.

Michael Connors, Chairman and CEO, Information Services Group: Right. So our m and a strategy is is, you know, we try to do about 80% plus organically, around 20% inorganically. We’ve done 14 acquisitions in our nineteen year history, so we do bolt ons. The latest one from Italy was a small bolt on, all recurring revenue, all in the public for the most part, all in the public sector. It was a strategic move for us to take advantage of what we think will be a growing, emerging, technology, market for us in Italy where the government is spending over the next, five to ten years an additional monies around kind of digital technology transformation.

And we felt by beefing up that unit for us, that would give us some great recurring revenue streams and capabilities in the future. On a broader m and a scale, what we look for is recurring revenue streams, technology capabilities, whether that’s in in certain areas where we may want more capabilities or an AI where there’s growth capabilities. Anything that will advance the channels that we have, the distribution channels that we have, which is into the c suite. If we can expand in the sales or in the marketing under some of these other areas, already having a trusted relationship with these clients in these very large corporations, We can expand our footprint, expand our our spending in those, enterprises. That’s how we think about our our m and a strategy, Mark.

Mark Riddick, Senior Analyst, Sidoti and Company: Excellent. And those comments actually segue pretty nicely to our one of the questions that came from the audience. And that’s whether you could speak to the advisory services that you offer and maybe talk about how your client management, is is handled, throughout that process.

Michael Connors, Chairman and CEO, Information Services Group: So the the the the ones that we, offer and, Michael, you may wanna just put up slide eight. The different services that we, that we offer here, these are the kind of the 15 areas that we focus on with our clients, if you will. On the AI, what they’re asking for, typically, a lot of technology contracts on average are three and a half years in length. So if you think back three years ago, there was no AI embedded in any of those contracts. And as those contracts come up for renewal, what they’re asking us for do, well, how do we think about AI as it relates to our $100,000,000 of spending in applications that we signed three years ago?

How do we think about that going forward? And so we talk about where the efficiencies are, where automation can occur, and that $100,000,000 like for like is more like gonna be 75 or $80,000,000 depending on what other scope they wanna be able to expand. So using AI as all of these contracts become renewal over the next couple of years, big area of focus. And then of course, areas of AI. So that’s an example number one.

Number two, if you look at the software block here, software is almost a trillion dollar industry. And we know that the software industry is also evolving with AI. We also know that every client, every enterprises spends millions of dollars on software, whether that’s Salesforce, whether that’s Oracle, whatever you may have there. And our view on software is a couple of things. One, how can we make the use of that as efficient as possible for you?

And number two, are you getting the best bang for the buck? So we will help them negotiate contracts with the Microsofts, with the Oracles, with the, Salesforce’s of the world, based on all of the database that we have and we know what is possible. And, also, to be sure that they’re not adding modules that they’re not getting full use of. So those are some examples of some of those services that we offer at the enterprise level.

Mark Riddick, Senior Analyst, Sidoti and Company: Great. And then one of the things, Mike, that you’ve you’ve talked about over the years that that and and we’ve talked about quite a bit is that the mix of the customer activity that is offensive and defensive, if you will, growth driven, cost savings driven. Maybe you could just touch a little bit on on some of of those trends and how you’re able to help with with with both sides of those that equation.

Michael Connors, Chairman and CEO, Information Services Group: You know, good good question, Mark. So there’s two areas focused primarily with these enterprises on technology. One is optimization. How can you cost optimize what I’m currently spending in applications? I spend 300,000,000 today, top quartile might be 200,000,000.

How do I get that 100,000,000? That’s one area. The second area is around using digital, using AI, using kind of capabilities to transform my business, Transform my claims processing in a property casualty firm as an example. And what we’re seeing in those two buckets cost optimization right now is about 55 to 60% of the work. And the transformation is about 40 and it varies by industry.

For example, energy and utilities, big area. AI needs lots of energy. They need a lot of work done to transform who they are, big in transformation. Healthcare need cost out. It’s completely gonna change with the whole work, especially here in The United States with Medicare and so forth.

They’re all about optimization. So the healthcare industry wants us to focus on cost optimization. So it’s those two buckets. It varies by industry. A little overweighted right now on cost optimization versus transformation.

Mark Riddick, Senior Analyst, Sidoti and Company: That’s that’s really helpful. Thanks, Mike. And as we’re, amazingly already out of time, I wanted to maybe just turn turn it back over to you for some closing comments. And thank you, of course, for joining us.

Michael Connors, Chairman and CEO, Information Services Group: Yes. Well, I wanna thank everybody, for joining us. Thank you for your interest, in ISG, and we are happy to carry on this dialogue. Just feel free to reach out to Mark or to to us, and we’re happy to continue the dialogue. And thank you to Sidoti and to Mark for hosting us today.

Mark Riddick, Senior Analyst, Sidoti and Company: Thank you, everyone, for participating. Everybody, have a wonderful and productive remainder of the afternoon. Take care.

Michael Connors, Chairman and CEO, Information Services Group: Thanks. Thank you.

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