Information Services Group Inc.

Previous wording

You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast” and similar expressions (or the negative of such expressions). Forward-looking statements include, but are not limited to, statements concerning 2026 revenue growth rates and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price, current competitive conditions and the impact of U.S. tariffs, trade barriers and restrictions, as well as wars, such as the conflict in Iran. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that we face, see the discussion in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 titled “Risk Factors” and in this Quarterly Report on Form 10-Q under Item 1A of Part II, “Risk Factors.”

Current wording

You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast” and similar expressions (or the negative of such expressions). Forward-looking statements include, but are not limited to, statements concerning 2026 revenue growth rates and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price, inflation and changes in interest rates, current competitive conditions and the impact of U.S. tariffs, trade barriers and restrictions, as well as wars, such as the conflict in Iran. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that we face, see the discussion in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 titled “Risk Factors” and in this Quarterly Report on Form 10-Q under Item 1A of Part II, “Risk Factors.”

Previous wording

Information Services Group, Inc. (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services sourcing that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its approximately 1,500 professionals

Current wording

Information Services Group, Inc. (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services sourcing that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its approximately 1,500 professionals worldwide working together to help clients maximize the value of their technology investments. For more information, visit

Previous wording

worldwide working together to help clients maximize the value of their technology investments. For more information, visit www.isg-one.com. The content on our website is available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Quarterly Report on Form 10-Q or any other filings.

Current wording

www.isg-one.com. The content on our website is available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Quarterly Report on Form 10-Q or any other filings.

Previous wording

Revenues increased $3.9 million, or approximately 6%, in the second quarter of 2026 compared to the second quarter of 2025. The increase in revenues in the Americas was primarily due to the increase in the Research, GovernX and Consulting service lines, partially offset by a decrease in Network & Software (“NaSa”) service line. The increase in revenues in Europe was primarily due to increases in the Consulting, NaSa and GovernX service lines, partially offset by a decrease in the Research service line. The decrease in revenues in Asia Pacific was attributable to a decrease in the Research service line. The translation of foreign currency revenues into U.S. dollars positively impacted performance compared to the prior year by $0.7 million.

Current wording

Revenues increased $2.7 million, or approximately 4%, in the third quarter of 2026 compared to the third quarter of 2025. The increase in revenues in Asia Pacific was attributable to increases in the Consulting and Network & Software (“NaSa”) service lines. The increase in revenues in Europe was primarily due to increases in the NaSa service line, partially offset by a decrease in the Consulting service line. The revenues in the Americas decreases less than one percent when compared to the prior year. The translation of foreign currency revenues into U.S. dollars positively impacted performance compared to the prior year by $0.2 million.

Previous wording

Total operating expenses increased $2.7 million, or approximately 5%, for the second quarter of 2026 compared to the second quarter of 2025. The increase in operating expenses was primarily attributable to higher bad debt expense of $4.3 million (refer to Note 5 – Revenue – “Accounts Receivable and Contract Assets” for further details), higher compensation expense of $1.4 million, and higher stock-based compensation expense of $0.2 million. These increases were partially offset by lower contractor labor expense of $3.0 million, of which $4.3 million is discussed in Note 5, lower professional fees of $0.1 million and lower restructuring costs of $0.1 million.

Current wording

Total operating expenses increased $0.9 million, or approximately 2%, for the third quarter of 2026 compared to the third quarter of 2025. The increase in operating expenses was primarily attributable to higher contract labor of $0.9 million, higher stock-based compensation expense of $0.4 million, higher travel and entertainment expense of $0.3 million, higher computer expenses of $0.3 million and higher compensation expense of $0.1 million. These increases were partially offset by lower professional fees of $0.4 million, restructuring and severance costs of $0.4 million, and acquisition-related costs of $0.2 million.

Previous wording

Sales and marketing costs consist principally of compensation expenses related to business development, proposal preparation and delivery and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and business intelligence activities. The Company maintains a

Current wording

Sales and marketing costs consist principally of compensation expenses related to business development, proposal preparation and delivery and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and business intelligence activities. The Company maintains a dedicated

Previous wording

dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the ISG Index and assembling proposals.

Current wording

global marketing function responsible for developing and managing sales campaigns, brand promotion, the ISG Index and assembling proposals.

Previous wording

Depreciation and amortization expenses were $1.1 million and $1.2 million for the second quarters of 2026 and 2025, respectively. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

Current wording

Depreciation and amortization expenses were $1.1 million for both third quarters of 2026 and 2025. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

Previous wording

The total decrease in other expenses of $0.5 million, or approximately 44%, in the second quarter of 2026 compared to the second quarter of 2025, was primarily due to fluctuations in foreign exchange rates and lower interest expense attributable to lower interest rates.

Current wording

The total increase in other expenses of $0.2 million, or approximately 54%, in the third quarter of 2026 compared to the third quarter of 2025, was primarily due to the prior year gain on the sale of the Automation business of $0.7 million, related to the final working capital settlement, partially offset by fluctuations in foreign currency and lower interest expense attributable to lower interest rates.

Previous wording

Our quarterly effective tax rate varies from period to period based on the mix of our earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the quarter ended June 30, 2026 was 37.1% compared to 38.7% for the quarter ended June 30, 2025. The difference for the quarter ended June 30, 2026 was primarily due to the impact of an increase in pre-tax earnings as well as the mix of earnings as discussed above. The Company also wrote off a receivable in Europe which was recognized as a discrete event in the quarter. The Company’s effective tax rate for the quarter ended June 30, 2026 was higher than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves during the quarter ended June 30, 2026.

Current wording

Our quarterly effective tax rate varies from period to period based on the mix of our earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the quarter ended September 30, 2026 was 42.4% compared to 27.2% for the quarter ended September 30, 2025. The increase in the effective tax rate for the quarter ended September 30, 2026 was primarily due to the impact of higher pre-tax earnings, the mix of earnings across jurisdictions, and a net working capital adjustment related to the sale of the automation business. The Company’s effective tax rate for the quarter ended September 30, 2026 was higher than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves during the quarter ended September 30, 2026.

Previous wording

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND JUNE 30, 2025

Current wording

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2026 AND SEPTEMBER 30, 2025

Previous wording

Revenues increased $5.5 million, or approximately 5%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in the Americas was primarily attributable to an increase in the Research and GovernX service lines, partially offset by a decrease in the Consulting and the NaSa service lines. The increase in revenue in Europe was primarily attributable to an increase in Consulting and NaSa service lines. The revenue decrease in Asia Pacific was primarily attributable to a decrease in our Research, Consulting, and GovernX service lines. The translation of foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $2.5 million.

Current wording

Revenues increased $8.3 million, or approximately 5%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase in revenue in Europe was primarily attributable to an increase in the NaSa and Consulting service lines. The revenue increase in Asia Pacific was primarily attributable to an increase in our Consulting and NaSa service lines. The increase in the Americas was primarily attributable to an increase in the Research and GovernX service lines, partially offset by a decrease in the NaSa and Consulting service lines. The translation of foreign currency revenues into U.S. dollars positively impacted performance in Europe and Asia Pacific compared to the prior year by $2.7 million.

Previous wording

Total operating expenses increased $2.7 million, or approximately 2%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in operating expenses was primarily attributable to higher bad debt expense of $4.3 million (refer to Note 5 – Revenue – “Accounts Receivable and Contract Assets” for further details), compensation expense of $0.6 million, travel and entertainment expenses of $0.4 million, and computer expenses of $0.3 million. These increases were partially offset by lower contractor labor expense of $2.1 million, of which $4.3 million is discussed in Note 5, lower stock-based compensation expense of $0.5 million and lower deal cost of $0.1 million.

Current wording

Total operating expenses increased $3.6 million, or approximately 2%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase in operating expenses was primarily attributable to higher bad debt expense of $4.3 million (refer to Note 5 – Revenue – “Accounts Receivable and Contract Assets” for further details), travel and entertainment expenses of $0.7 million, compensation expense of $0.6 million, subscription expenses of $0.4 million and computer expenses of $0.4 million. These increases were partially offset by lower contractor labor expense of $1.2 million, which includes $4.3 million sub-contractor cost reversal described in Note 5, lower stock-based compensation expense of $0.1 million, lower professional fees of $0.4 million, lower severance costs of $0.4 million and lower acquisition-related costs of $0.3 million.

Previous wording

Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and profit-sharing plan contributions. A portion of compensation expenses for certain billable employees is allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities. Bonus compensation is determined based on achievement against Company financial targets and is accrued monthly throughout the year based on management’s estimates of target achievement. Statutory and elective profit-sharing plans

Current wording

general and administrative costs based on relative time spent between billable and non-billable activities. Bonus compensation is determined based on achievement against Company financial targets and is accrued monthly throughout the year based on management’s estimates of target achievement. Statutory and elective profit-sharing plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers’ compensation and disability insurance.

Previous wording

Depreciation and amortization expense for the six months ended June 30, 2026 and June 30, 2025 was $2.1 million and $2.3 million, respectively. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

Current wording

Depreciation and amortization expense for the nine months ended September 30, 2026 and September 30, 2025 was $3.2 million and $3.4 million, respectively. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize certain costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

Previous wording

The total decrease in other expenses of $0.8 million, or approximately 38%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, was primarily the result of fluctuations in foreign currency and lower interest expense attributable to lower interest rates.

Current wording

The total decrease in other expenses of $0.6 million, or approximately 23%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, was primarily the result of fluctuations in foreign currency and lower interest expense attributable to lower interest rates.

Previous wording

to be incurred during the current fiscal year. Our effective tax rate for the six months ended June 30, 2026 was 37.1% compared to 38.4% for the six months ended June 30, 2025. The difference for the six months ended June 30, 2026 was primarily due to the impact of an increase in pre-tax earnings as well as the mix of earnings discussed above. The Company also wrote off a receivable in Europe which was recognized as a discrete event in the quarter. The Company’s effective tax rate for the six months ended June 30, 2026 was higher than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves or valuation allowances during the six months ended June 30, 2026.

Current wording

Our nine months effective tax rate varies from period to period based on the mix of our earnings among the various state and foreign tax jurisdictions in which our business is conducted and the level of non-deductible expenses projected to be incurred during the current fiscal year. Our effective tax rate for the nine months ended September 30, 2026 was 39.1% compared to 33.8% for the nine months ended September 30, 2025. The increase in the effective tax rate for the nine months ended September 30, 2026 was primarily due to the impact of higher pre-tax earnings, the mix of earnings across jurisdictions, and a net working capital adjustment related to the sale of the automation business. The Company’s effective tax rate for the nine months ended September 30, 2026 was higher than the statutory rate primarily due to non-deductible expenses and the impact of earnings in foreign jurisdictions. There were no significant changes in uncertain tax position reserves or valuation allowances during the nine months ended September 30, 2026.

Previous wording

We use non-GAAP financial measures to supplement the financial information presented on a GAAP basis. We provide adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, acquisition and disposition-related costs, gain/loss on asset disposal, and severance, integration and other expense), adjusted net income (defined as net income plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, acquisition and disposition-related costs, gain/loss on asset disposal, and severance, integration and other expense, on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net tax effect of the items set forth in the table below. These are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations that management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by the Company to evaluate the Company’s business strategies and management’s performance. However, they are not measurements of financial performance under GAAP and should not be considered as alternatives to measures of performance derived in accordance with GAAP. These non-GAAP financial measures exclude non-cash and certain other special charges that some investors believe may obscure the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. We believe that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.

Current wording

We use non-GAAP financial measures to supplement the financial information presented on a GAAP basis. We provide adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, acquisition and disposition-related costs, gain/loss on asset disposal, gain on the sale of business, and severance, integration and other expense), adjusted net income (defined as net income plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, acquisition and disposition-related costs, gain/loss on asset disposal, gain on the sale of business, and severance, integration and other expense, on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net tax effect of the items set forth in the table below. These are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations that management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by the Company to evaluate the Company’s business strategies and management’s performance. However, they are not measurements of financial performance under GAAP and should not be considered as alternatives to measures of performance derived in accordance with GAAP. These non-GAAP financial measures exclude non-cash and certain other special charges that some investors believe may obscure the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. We believe that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.

Previous wording

As of June 30, 2026, our cash, cash equivalents and restricted cash totaled $23.8 million compared to $28.8 million as of December 31, 2025, a net decrease of $5.0 million, which was primarily attributable to the following:

Current wording

As of September 30, 2026, our cash, cash equivalents and restricted cash totaled $28.6 million compared to $28.8 million as of December 31, 2025, a net decrease of $0.1 million, which was primarily attributable to the following:

Previous wording

The Company’s financial statements include outstanding borrowings of $59.2 million at both June 30, 2026 and December 31, 2025, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company’s outstanding borrowings was approximately $59.5 million at both June 30, 2026 and December 31, 2025. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company’s incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows was 5.3% at both June 30, 2026 and December 31, 2025. The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates. During the six months ended June 30, 2026, the Company borrowed $20.0 million and subsequently repaid $20.0 million of the outstanding balance on its revolving credit facility. The Company is currently in compliance with its financial covenants.

Current wording

The Company’s financial statements include outstanding borrowings of $59.2 million at both September 30, 2026 and December 31, 2025, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company’s outstanding borrowings was approximately $59.4 million at September 30, 2026 and $59.5 million at December 31, 2025, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company’s incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows was 5.7% and 5.3% at September 30, 2026 and December 31, 2025, respectively. The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates. During the nine months ended September 30, 2026, the Company borrowed $20.0 million and subsequently repaid $20.0 million of the outstanding balance on its revolving credit facility. The Company is currently in compliance with its financial covenants.

Previous wording

On May 5, 2026, the Board approved a second-quarter dividend of $0.045 per share, paid on June 26, 2026, to shareholders of record as of June 5, 2026.

Current wording

On August 4, 2026, the Board approved a third-quarter dividend of $0.045 per share, paid on September 25, 2026, to shareholders of record as of September 4, 2026.

Previous wording

On August 4, 2026, the Board approved a third-quarter dividend of $0.045 per share, payable September 25, 2026, to shareholders of record as of September 4, 2026.

Current wording

On October 30, 2026, the Board approved a fourth-quarter dividend of $0.045 per share, payable on December 18, 2026, to shareholders of record as of December 4, 2026.

Previous wording

See Note 3—Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report.

Current wording

See Note 3—Summary of Significant Accounting Policies in our condensed consolidated financial statements included elsewhere in this report.