Information Services Group Inc.

INFORMATION SERVICES GROUP, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share data)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except per share data)

NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Information Services Group, Inc. (the “Company”, “ISG”, “we”, “us”, or “our”) 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 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 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.

NOTE 2—BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are considered necessary for a fair statement of the financial position of the Company as of September 30, 2026, the results of operations for the three and nine months ended September 30, 2026 and 2025 and the cash flows for the nine months ended September 30, 2026 and 2025. The condensed consolidated balance sheet as of December 31, 2025 has been derived from the Company’s audited consolidated financial statements. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2025, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC.

Sale of Automation Business Line

Based on the achievement of certain contractual requirements for the year ended December 31, 2024, during the first quarter of 2025, the Company received additional proceeds in cash from the sale of its Automation business line from UST Global Inc. of $2.0 million. Additionally, pursuant to the purchase agreement, which provided for a working capital adjustment, the Company received $0.7 million from UST Global Inc. as final settlement during the third quarter of 2025.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the revenue recognition guidance for contracts in which control is transferred to the customer over time affect the amounts of revenues, expenses, contract assets and contract liabilities. Numerous internal and external factors can affect estimates. Estimates are also used for, but are not limited to, the allowance for credit losses, useful lives of furniture, fixtures and equipment and definite-lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation and the valuation of stock-based compensation.

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes.

Fair Value

The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities and accrued interest approximated their fair values as of September 30, 2026 and December 31, 2025 due to the short-term nature of these accounts.

Fair value measurements were applied with respect to the Company’s non-financial assets and liabilities measured on a nonrecurring basis, which would consist of measurements primarily of goodwill, intangible assets and other long-lived assets and assets acquired and liabilities assumed in a business combination.

Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy:

The following tables summarize the assets and liabilities (as applicable) measured at fair value on a recurring basis at the dates indicated:

The following table represents the change in contingent consideration liability during the nine months ended September 30, 2026:

The Company’s accompanying unaudited condensed consolidated financial statement 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. 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 at 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.

Recently Issued Accounting Pronouncements

Income Statement Disaggregation

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued ASU 2024-03 to improve the disaggregation of income statement expenses. This updated guidance requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company does not expect ASU 2024-03 to have a material impact on the Company’s consolidated financial statements.

Intangibles-Goodwill and Other-Internal-Use Software

In September 2025, the FASB issued ASU 2025-06 to modernize the accounting for software costs. Under the new guidance, internal-use software costs are capitalized when management has authorized and committed to funding the project, and it is probable that the software will be completed and used for its intended function. This updated guidance addresses challenges in applying outdated guidance to modern software development methods, such as agile programming, which are incremental and iterative rather than sequential. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2027. The Company continues to evaluate the impact on the Company’s consolidated financial statements.

NOTE 4—ACQUISITION

AI Maturity Index Acquisition

On January 13, 2026, ISG entered into an asset purchase agreement to acquire substantially all of the assets of AI Maturity Index, a SaaS (Software as a Service) platform that allows organizations to assess the AI readiness of their workforces and improve their employees’ ability to leverage AI technology, for total consideration of$750,000, consisting of$500,000 paid at closing and$250,000 of fixed deferred consideration payabletwo years from the signing date. The assets acquired consist primarily of developed software and related intellectual property that will be integrated into ISG’s AI-related offerings, including the ISG AI Maturity Index. The acquired assets will not operate as a standalone business post-acquisition. The related software acquired, which is capitalized within “Furniture, fixtures and equipment, net,” will be amortized on a straight-line basis over four years.

Martino & Partners Acquisition

On September 1, 2025, the Company completed the acquisition of Martino & Partners s.r.l. (“Martino & Partners”), a strategic advisory firm serving public and private sector clients in Italy, for total consideration of EUR 2.0 million (USD 2.3 million) in cash paid at closing; USD 250,000 worth of shares of ISG’s common stock, issued promptly following the closing; and EUR 350,000 (USD 0.4 million) in cash, to be paid no later than April 30, 2028. Martino & Partners will also have the right to receive additional consideration paid via earn-out payments if certain financial targets are met. The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) 805,Business Combinations.

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

The primary factors that drove the goodwill recognized, the majority of which is deductible for tax purposes, were the inclusion of the legacy Martino & Partners workforce and the expansion of the Company’s client base, geographic footprint and capabilities in the European market.

Costs associated with this acquisition are included in the selling, general and administrative expenses in our consolidated statements of income and comprehensive income and were immaterial.

Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

NOTE 5—REVENUE

The majority of our revenue is derived from contracts that can span from a few months to several years. We enter into contracts that can include various combinations of services, which, depending on contract type, are sometimes capable of being distinct. If services are determined to be distinct, they are accounted for as separate performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using our best estimate of the standalone selling price, or SSP, of each distinct product or service in the contract. The Company establishes SSP based on management’s estimated selling price or observable prices of products or services sold separately in comparable circumstances to similar clients.

Our contracts may include promises to transfer multiple services and products to a client. Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require judgment.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities). Our clients are billed based on the type of arrangement. A portion of our services is billed monthly based on hourly or daily rates. There are also client engagements in which we bill a fixed amount for our services. This may be one single amount covering the whole engagement or several amounts for various phases, functions or milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits before revenue is recognized, resulting in contract liabilities. Contract assets and liabilities are generally reported in the current assets and current liabilities sections of our consolidated balance sheet, at the end of each reporting period, based on the timing of the satisfaction of the related performance obligation(s). For multi-year sales contracts with annual invoicing, we perform a significant financing component calculation and recognize the associated interest income throughout the duration of the financing period. In addition, we reclassify the resulting contract asset balances as current and noncurrent receivables as receipt of the consideration is conditional only on the passage of time and there are no performance risk factors present. See the table below for a breakdown of our contract assets and contract liabilities.

Non-current contract assets of $1.3 million as of December 31, 2025 are included in “Other assets” and non-current contract liabilities of $3.6 million as of September 30, 2026 are included in “Other liabilities” on our consolidated balance sheet.

Revenue recognized for the three and nine months ended September 30, 2026 that was included in the contract liability balance at January 1, 2026 was $0.6 million and $9.2 million, respectively, primarily representing revenue from the Company’s subscription, fixed-fee, and research contracts.

Remaining Performance Obligations

As of September 30, 2026, the Company had $123.1 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

Accounts Receivable and Contract Assets

During the fourth quarter of 2023, a client that had engaged the Company for two multi-year projects commencing in 2021 and 2022, respectively, failed to make payments in accordance with the contracted schedule. As a result, the Company ceased performing services under the agreement. After unsuccessful negotiations, the Company provided the client with notice that it would be terminating the respective projects. Accordingly, during the fourth quarter of 2023, the Company recorded through bad debt expense an allowance for doubtful accounts reserve of $4.9 million associated with this client. The specific reserve recorded as of December 31, 2024 represented management’s best estimate of the probable amount of non-collection on the outstanding receivables under these agreements.

During the three months ended June 30, 2025, after exhausting all collection efforts on the first of the two multi-year projects, the Company wrote off $3.6 million of outstanding receivables against the previously established reserve. As all amounts written off were previously fully reserved, there was no incremental impact to our consolidated statements of income and comprehensive income for that period.

In April 2024, the Company commenced legal action against the client to collect outstanding receivables on the other multi-year project. On September 3, 2025, the court issued a final, non-appealable judgment holding the client liable to the Company for approximately $5.6 million, plus legal interest at 5% per annum until full payment is made. The Company subsequently commenced aggressive collection efforts.

After exhausting all collection efforts on the judgment, including through asset discovery authorized by court orders, the Company fully wrote off the remaining outstanding accounts receivable balance of $5.6 million during the quarter ended June 30, 2026. As such, the Company recorded an additional $4.3 million of bad debt expense in selling, general and administrative expenses. Concurrently, the Company wrote off $4.3 million of the remaining accrued sub-contractor costs directly related to this project. This reversal was recorded in direct costs and expenses for advisors, where it had originally been recorded. Under the sub-contractor agreement related to this project, amounts owed to the sub-contractor are not payable unless and until the related receivables are collected from the client. These write-offs offset, and thus have no net impact on the Company's results of operations for the three months ended June 30, 2026.

Separately, the Company was engaged in litigation with a client over a disputed $4.7 million accounts receivable balance for services rendered. During the quarter ended September 30, 2026, the Company entered into a settlement agreement to resolve such litigation. The settlement fully resolved the parties’ claims relating to this matter.

NOTE 6—NET INCOME PER COMMON SHARE

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company. For the three and nine months ended September 30, 2026,0.1 million and 1.2 million RSUs, respectively, and for the three and nine months ended September 30, 2025,0.1 million and 2.1 million RSUs, respectively, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share:

NOTE 7—INCOME TAXES

The Company’s effective tax rate for the three and nine months ended September 30, 2026 was 42.4% and 39.1%, respectively, based on pretax income of $5.8 million and $15.4 million, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2025 was 27.2% and 33.8%, respectively, based on pretax income of $4.2 million and $10.2 million, respectively. The Company’s effective tax rate for both quarters and nine months ended September

30, 2026 and September 30, 2025 were impacted by non-deductible expenses and earnings and losses in certain foreign jurisdictions.

NOTE 8—COMMITMENTS AND CONTINGENCIES

The Company is subject to contingencies which arise through the ordinary course of business. All material liabilities of which management is aware are properly reflected in the financial statements as of September 30, 2026 and December 31, 2025.

Martino & Partners Contingent Consideration

As of September 30, 2026, the Company has recorded a liability of EUR 0.3 million (USD 0.4 million) representing the estimated fair value of contingent consideration related to the acquisition of Martino & Partners, which was classified as noncurrent and included in other liabilities on our consolidated balance sheet.

Legal Reserves

From time to time, the Company is a party to litigation, claims and other contingencies, including, but not limited to, regulatory and employee matters as well as examinations and investigations by governmental agencies, which arise in the ordinary course of business. The Company records a contingent liability when it is probable that a loss has been incurred and the amount of loss is reasonably estimable in accordance with ASC Topic 450, Contingencies, or other applicable accounting standards. Such reserves are included in accrued liabilities on the condensed consolidated balance sheets. Based on the information available at the present time, the Company is unable to predict the ultimate outcome of any litigation or claims. However, the Company intends to vigorously defend its legal position on all claims and, to the extent necessary, seek recovery.

NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION

The Company operates asone reportable segment consisting primarily of fact-based sourcing advisory services. The Company operates principally in the Americas, Europe and Asia Pacific.

The Company’s Chief Operating Decision Maker (the “CODM”) is our Chairman of the Board of Directors (the “Board”) and Chief Executive Officer, Michael Connors. The CODM uses net income as presented on our consolidated statements of income and comprehensive income in evaluating performance and determining how to allocate resources of the Company as a whole.

Geographical revenue information for the segment is as follows:

The segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating income by geography or any other measure or metric, other than consolidated, for the purposes of making operating decisions or allocating resources.

The following table represents a breakdown of net income that is used to help determine how resources are allocated:

(1) Other segment expenses include communication, occupancy, marketing, stock-based compensation, acquisition and disposition and other overhead expenses.

NOTE 10—FINANCING ARRANGEMENTS AND LONG-TERM DEBT

On February 22, 2023, the Company amended and restated its senior secured credit facility to increase the revolving commitments per the revolving facility from $54.0 million to $140.0 million and eliminate its term loan (as further amended, the “2023 Credit Agreement”). The material terms under the 2023 Credit Agreement are as follows. Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:

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 and $59.5 million as of September 30, 2026 and 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.

NOTE 11—SUBSEQUENT EVENTS

On October 30, 2026, the Company’s Board approved a fourth-quarter dividend of $0.045 per share, payable December 18, 2026, to shareholders of record as of December 4, 2026. The dividends are accounted for as a decrease to Stockholders’ Equity. All future dividends will be subject to the Board’s prior approval.