III 10-K & 10-Q changes, risk factors and insider trading

Since our inception, we have expanded through acquisitions.acquisitions, including our most recent acquisition of Martino & Partners s.r.l. (“Martino & Partners”), a strategic advisory firm serving public and private sector clients in Italy, on September 1, 2025. In the future, we plan to pursue additional acquisitions and investments as opportunities arise. We may not be able to successfully integrate businesses that we acquire in the future without substantial expense, delays or other operational or financial problems. In addition, we may not be able to identify, acquire or profitably manage additional businesses. If we pursue acquisition or investment opportunities, these potential risks could disrupt our ongoing business, result in the loss of key customers or personnel, increase expenses and otherwise have a material adverse effect on our business, results of operations and financial condition.

We have conducted dispositions in the pastpast, most recently disposing of our automation business in 2024, and may again in the future. Disposition involve risks and uncertainties, such as our ability to sell such businesses for a satisfactory price and terms and in a timely manner, or at all, potential disruptions to other parts of our organization and distraction of management, the reallocation of internal resources that would otherwise be devoted to completing strategic acquisitions, potential losses of key employees or customers, exposure to unanticipated liabilities, any ongoing obligations to support the business following any such disposition, and other adverse financial impacts. The realization of any of these risks could adversely affect our business.

Artificial Intelligence (“AI”)intelligence presents new risks and challenges that may affect our business. We have made, and expect to continue to make, investments to integrate AI and machine learning technology into our services. Given the nature of AI technology, we face significant competition from other companies and an evolving regulatory landscape. Our AI efforts may not be successful, and our competitors may incorporate AI into their products more successfully than us, which could impair our ability to compete effectively and adversely affect our financial results. The rapid evolution of AI combined with the uncertain and often inconsistent regulatory landscape may require significant additional resources and costs and could in some cases limit our ability to implement AI capabilities in our solutions or potentially result in the implementation failing to produce the desired outcome. Despite our implementation of programs designed to support responsible AI use and development, we may not successfully address all issues that may arise. For example, privacy concerns, user consent, supply chain security, transparency and the accuracy, completeness and suitability of data sets are all potential issues that could adversely affect our business, reputation or financial results.

● global economic and political conditions and related risks, including acts of terrorism, war, such as the war in Ukraine and the conflict in the Middle East, pandemics, inflation, slowing growth, rising interest rates and recession; and

Our 25 largest clients accounted for approximately 30% and 33% of revenue in 2024both 2025 and 2023, respectively.2024. If one or more of our large clients terminate, significantly reduce their engagement or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, sizable receivable balances could be jeopardized if large clients fail to remain a going concern.

Approximately 34% of our revenues for 2025 and 36% of our revenues for 2024 and 39% of our revenue for 2023 were derived from sales outside of the Americas. Our operating results are subject to the risks inherent in international business activities, including:

● crime, strikes, riots, civil disturbances, pandemics, terrorist attacks and wars, such as the war in Ukraine and the conflict in the Middle Eastwars;

Data protection and emerging cybersecurity laws and self-regulatory codes may restrict our activities and increase our costs.

Various statutes and rules regulate conduct in areas such as privacyprivacy, data protection, and data protectioncybersecurity that may affect our collection, use, storage, and transfer of information both abroad and in the United States. Compliance with these laws and self-regulatory codes may require us to make certain investments or may dictate that we not offer certain types of services or only offer such services after making necessary modifications. Moreover, these laws and regulations impose operational requirements, including disclosures to consumers about personal data practices, opt-out and consent choices and required contractual terms with certain third parties, and obligations to provide notice to individuals, third parties, and/or regulators in the event of certain cybersecurity incidents involving personal data. Failure to comply with these laws and self-regulatory codes may result in, among other things, civil and criminal liability, negative publicity, restrictions on further use of datadata, fines, and/or liability under contractual warranties.

As a global company, ISG must comply with various international and domestic data privacy regulations such as (i) the EU and UK General Data Protection Regulation (“GDPR”), which has extra-territorial scope and substantial fines for breaches (up to 4% of global annual revenue or €20 million, whichever is greater), (ii) the California Consumer Privacy Act, which, unlike data privacy provisions enacted by other US states, covers individuals acting in a commercial or employment context not just as consumers, and (iii) the Australian Privacy Act, among others. In addition, India’s Ministry of Electronics and Information Technology notified the newDigital IndiaPersonal Data Protection Rules 2025 (the “Rules”) November 13, 2025, operationalizing the Digital Personal Data Protection Act 2023 (“DPDPDPDPA”) draftenacted rulesby arethe outParliament of India in August 2023. Companies operating in India must meet the DPDPA’s core compliance obligations, which includes reporting data breaches within seventy-two hours, appointing consent managers and data protection officers, and implementing systems for consultation,express whichuser closed in February 2025. The DPDP is anticipated to come into forcepermission, within twoa years.phased twelve-to-eighteen-month timeline. Like the GDPR, the DPDPDPDPA has extra-territorial reach. The DPDPDPDPA shares many provisions with existing privacy laws, and ISG therefore anticipates that its existing processes already broadly align with the new law. However, like the GDPR, failure to comply with the DPDPDPDPA may lead to substantial fines. ISG is also continuing to monitor the development of and public guidelines regarding the EU’s ePrivacy Regulation and published guidelines to determine whether further action asis required.

A significant portion of our business is conducted over the internet, and we rely on the secure processing, storage and transmission of confidential, sensitive, proprietary and other types of information relating to our business operations and confidential and sensitive information about our clients and employees in our computer systems and networks, and in those of our third-party vendors. Individuals, groupsgroups, state-sponsored organization, and state-sponsoredactors organizationsutilizing AI may take steps that pose threats to our operations, our computer systems, our employees, and our clients. The cybersecurity risks we face range from cyberattacks common to most industries, such as the development and deployment of malicious software to gain access to our networks and attempt to steal confidential information, launch distributed denial of service attacks or attempts at other coordinated disruptions, to more advanced threats that target us because of our prominence in the global research and advisory field. Ransomware risk has increased significantly in recent years and presents a significant risk of financial extortion and loss of data. Our operating model allows employees to continue to work remotely or on a hybrid basis, which magnifies the importance of the integrity of our remote access security measures.

We also face risks related to our use of third-party supplierssuppliers, ifwith whom we may share data and operational systems. If such suppliers are affected by a cybersecurity threat or incident, whichit could result in not only a reduction in or loss of their ability to service us (which could be a significant component of our services to clients), but also the exposure of ISG or client data or a potential backdoor into ISG’s systems and network.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. Auditing Standard No. 5 provides the professional standards and related performance guidance for auditors to attest to, and report on, management’s assessment of the effectiveness of internal control over financial reporting under Section 404. Management’s assessment of internal control over financial reporting requires management to make subjective judgments and,and some of the judgments will be in areas that may be open to interpretation. Therefore, our management’s report on our internal control over financial reporting may be difficult to prepare, and our auditors may not agree with our management’s assessment.

Information Services Group, Inc. (Nasdaq: III) is a global Artificial 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,data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its 1,3001,500 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 Annual Report on Form 10 K or any other filings.

Inflation rates and the adverse effect of interest rates havecontinued beento be volatile in the past year. Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy. Changes to interest rates has impacted our business operations, financial performance and results of operations, as our interest expense has decreased from $6.2 million in 2023 to $5.8 million in 2024.2024 to $4.1 million in 2025. The Company continuously monitors these changes and evaluates any effect. If our costs, in particular personnel-related costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases in future periods. Our inability or failure to realize these offsets could adversely affect our business operations, financial performance and results of operations.

RevenuesTotal revenues for the year ended December 31, 2025 decreased by $43.5$2.9 million or approximately 15%1% in 2024.2025, with revenues decreasing in Europe and Asia Pacific but increasing in the Americas. The decrease inincrease revenue in the Americas was primarily attributabledue to aan decreaseincrease in ourthe Advisory,Consulting, Network & Software Advisory Services (“NaSa”)Research, and AutomationGovernX service lines, partially offset by ana increasedecrease due to the prior year’s sale of the Automation service line and lower revenue in Researchthe Network & Software (“NaSa”) service line. The decrease in revenue in Europe was primarily attributable to athe decreaseprior inyear’s oursale Advisoryof andthe Automation service lines.line and lower revenues in the NaSa and GovernX service lines, partially offset by an increase in the Consulting service line. The revenue decrease in revenue in Asia Pacific was primarily attributable to a decrease in ourthe AdvisoryConsulting, NaSa and GovernX service line. The sale of Automation service line also attributed to the decrease in revenue in the Americas and Europe.lines. The translation of foreign currency revenues into U.S. dollars hadpositively aimpacted positive impactperformance in Europe and Asia Pacific compared to the prior year by $0.7$2.3 million.

Total operating expenses decreased by $34.6$14.9 million, or approximately 13%,6%, in 2024.2025. The decrease in operating expenses was primarily due primarily to lower contract labor of $13.7 million, compensation expenses of $10.5 million,automation license fees of $5.7 million, contingent consideration adjustmentexpense of $2.5$8.0 million, restructuring costs of $2.6 million, acquisition and disposition-related costs of $2.4 million, non-cashcompensation expense of $2.7 million, expense reversal associated with an amount that was no longer due to a sub-contractor of $1.9 million, computer expense of $0.3 million, bad debt expense of $0.2 million, and stock-based compensation of $1.1 million, professional fees of $0.7 million and travel and entertainment expenses of $0.6$0.2 million. These costs were partially offset by the prior year’s contingent consideration adjustment of $1.5 million, higher acquisition-legal reserves of $1.9 million, travel and disposition-relatedentertainment costexpense of $2.7$1.2 millionmillion, and badprofessional debt expensefees of $0.6 million.

Depreciation and amortization expenses amounted to $4.5 million in 2025 and $5.9 million in 2024 and $6.3 million in 2023,2024, respectively. The decrease of $0.4$1.4 million was primarily due to the sale of the automation business inon October 1, 2024. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expenses are generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize some 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.

The total decreaseincrease of $5.3$2.7 million was primarily attributable to the reduction of gain on the sale of business of $4.5$3.8 million that is related to the prior year sale of the automationAutomation business.business, and lower interest income and partially offset by lower interest expense attributable to a lower debt balance and lower interest rates.

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, taxloss indemnityon receivables,assets accountsdisposal, receivableschange reserve,in contingent consideration, acquisition and disposition-related costs, gain/loss on 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, accountsloss receivableon reserves,assets write-offdisposal, ofchange deferredin financingcontingent costconsideration, and severance, integration,integration and other expense, gain/loss sales of business and other expense on a tax-adjusted basis) and adjusted net income per diluted share, excluding the net of 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 and exclude non-cash and certain other special charges that some investors may believe 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 financial 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.

The Company’s financial statements include outstanding borrowings of $59.2 million asat both of December 31, 20242025 and $79.2 million as of December 31, 2023,2024, 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 $59.6$59.5 million and $79.8$59.6 million as of December 31, 20242025 and December 31, 2023,2024, 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 6.4%5.3% and 6.9%6.4% for December 31, 20242025 and December 31, 2023,2024, 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. In 2024,2025, the Company borrowed $28.0$15.0 million and subsequentsubsequently repaid $48.0$15.0 million of its revolving credit facility. The Company is currently in compliance with its financial covenants.

Our results are impacted principally by our full-time consultants’ utilization rate, the number of business days in each quarter and the number of our revenue-generating professionals who are available to work. Our utilization rate can be negatively affected by increased hiring because there is generally a transition period for new professionals that resultresults in a temporary drop in our utilization rate. Our utilization rate can also be affected by seasonal variations in the demand for our services from our clients. The number of business workdays is also affected by the number of vacation days taken by our consultants and holidays in each quarter. We typically have fewer business workdays available in the fourth quarter of the year, which can impact revenues during that period. Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. The volume of work performed for any particular client can vary widely from period to period.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCHJUNE 31,30, 2026 AND MARCHJUNE 31,30, 2025

Revenues increased $1.6$3.9 million, or approximately 3%,6%, in the firstsecond quarter of 2026 compared to the firstsecond 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 and Network & Software (“NaSa”) service lines. The decrease in revenues in the Americas was primarily due to the decline in theConsulting, NaSa and the ConsultingGovernX service lines, partially offset by ana increasedecrease in GovernX andthe Research service lines.line. The decrease in revenues in Asia Pacific was attributable to a decrease in the Consulting and Research service lines.line. The translation of foreign currency revenues into U.S. dollars positively impacted performance compared to the prior year by $1.8$0.7 million.

Total operating expenses wereincreased relatively$2.7 consistentmillion, or approximately 5%, for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The increase in operating expenses was primarily drivenattributable byto higher contractbad labordebt expense of $0.9$4.3 million,million travel(refer to Note 5 – Revenue – “Accounts Receivable and entertainmentContract Assets” for further details), higher compensation expense of $0.3$1.4 million, and computerhigher stock-based compensation expense of $0.2 million. These increases were partially offset by lower compensationcontractor labor expense of $0.8$3.0 million, stock-based compensation expense of $0.7which million,$4.3 andmillion is discussed in Note 5, lower professional fees of $0.1 million and lower restructuring costs of $0.1 million.

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 areis 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 are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers’ compensation and disability insurance.

Depreciation and amortization expenses were $1.0$1.1 million and $1.1$1.2 million for the firstsecond 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.

The total decrease in other expenses of $0.3$0.5 million, or approximately 30%44%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, was primarily due to fluctuations in foreign exchange rates and lower interest expense attributable to lower interest rates, and fluctuations in foreign exchange rates.

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 MarchJune 31,30, 2026 was 37.2%37.1% compared to 37.9%38.7% for the quarter ended MarchJune 31,30, 2025. The difference for the quarter ended MarchJune 31,30, 2026 was primarily due to the impact of an increase in pre-tax earnings.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 MarchJune 31,30, 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 MarchJune 31,30, 2026.

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 assetsasset disposaldisposal, 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 assetsasset disposaldisposal, 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.

As of MarchJune 31,30, 2026, our cash, cash equivalents and restricted cash totaled $22.8$23.8 million compared to $28.8 million as of December 31, 2025, a net decrease of $6.0$5.0 million, which was primarily attributable to the following:

The Company’s financial statements include outstanding borrowings of $59.2 million at both MarchJune 31,30, 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 MarchJune 31,30, 2026 and December 31, 2025, respectively.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 MarchJune 31,30, 2026 and December 31, 2025, respectively.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 threesix months ended MarchJune 31,30, 2026, the Company borrowed $20.0 million and subsequently repaid $20.0 million of the outstanding balance on its revolving credit.credit facility. The Company is currently in compliance with its financial covenants.

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

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