Information Services Group (III) investor relations material

Executive summary

• Q3 revenue rose 4.4% YoY to $65.1 million; Adjusted EBITDA increased 18.7% to $10 million, with a 15.4% margin, the highest in four years.

• AI-related revenue grew 56% to nearly $34 million, exceeding half of quarterly revenue; recurring revenue rose nearly 8% to a record $30.5 million.

• Adjusted EBITDA grew double digits for eight consecutive quarters; cash generation was strong and the pipeline exceeded year-ago levels.

• Nine-month revenue grew 5% to $191.8 million; net income was $9.4 million versus $6.7 million.

Financial highlights

• Operating income rose 40.6% to $6.5 million from $4.6 million; operating margin increased 255 bps YoY to 9.9%.

• GAAP net income was $3.4 million, or $0.07 per diluted share, versus $3.1 million and $0.06; adjusted net income was $5 million, or $0.10 per share.

• Q3 operating expenses rose 2% YoY to $58.7 million, as higher contract labor and compensation costs more than offset lower professional fees and other costs.

• Operating cash flow was $12.3 million, the strongest quarter in five years; 9M operating cash flow was $16.8 million.

Outlook and guidance

• Q4 revenue guidance is $64 million–$65 million and Adjusted EBITDA guidance is $9 million–$10 million; continued YoY growth and margin expansion are expected.

• Management expects double-digit Q4 Adjusted EBITDA growth and strong operating cash flow through year-end.

• Long-term targets remain high-single-digit revenue growth and EBITDA growth at 1.5x revenue growth; recent EBITDA flow-through exceeded that ratio.

• Current cash and expected operating cash flows are anticipated to cover working capital, capital expenditures and debt needs for at least 12 months.