Good morning, everyone. It's now 9:15 here on the East Coast, and we are ready to begin our next presentation. My name is Mark Riddick, a senior analyst with Sidoti & Company, and I thank you for joining us at the Sidoti March Small Cap Virtual Conference. Our next presenting company is Information Services Group. The ticker is the letter I three times. Joining us today is Michael Connors, Chairman, CEO, and Founder, and Michael Sherck, Chief Financial Officer. Now, before we begin, just a reminder, we will have time for Q&A at the end of prepared remarks, but you won't need to wait until the end. Just click on the QA button at the bottom of your screen and feel free to submit questions at any point during our time together. With that, we can turn the call over to Mike and Mike. Good morning, gentlemen.
Good morning.
Thanks, Mark, and good morning, everyone. Thank you for taking the time and your interest in Information Services Group. Let me dig right in on our charts here and talk a little bit about who we are. We are a firm that was founded. I founded the company in 2006. We are a global AI-centered technology research and advisory firm. Essentially, what that means is all of the work that we do with the largest corporations in the world, there is an AI element to all of the work that we do, and we'll talk about that. We have 1,600 of our employees on the ground that operate in 20 countries. We are differentiated mainly because of the great data and database that we have. We believe the deepest technology benchmark and contract database in the world.
We have 10 million real-world data points, and we are the world leader in sourcing with a market share of greater than 50%. Our work is all around the top enterprises in the world. We operate in 20 different industry segments. If you go to each of those segments, 10, 12, or 13 of the largest companies by revenue in those segments are clients of ours. We have 900 clients, and we operate on a global basis. If you go to kind of the areas that we operate in and think about it from left to right, we provide research. Think of our firm as kind of a combination of a Gartner and a McKinsey put together. That's who we are. Research, think about it as subscriptions. That research is focused almost exclusively around technology. Think about cloud, think about blockchain, think about AI, so forth.
We then have a terrific benchmarking service. This is where a large company might ask us to come in, benchmark their $500 million technology spend, compare it to industry peers, and talk about whether they stack up in the first quartile of efficiency or not. The third bucket, again, going around the horn here on the advisory, on the advisory bit here, think about the consulting areas. This is where we help our clients. We advise them on their technology, the most efficient way to operate. We have a terrific platform called ISG Tango. This is an AI-powered platform where the enterprise, the technology providers like the IBMs and the Accentures all gather on this platform.
When a company like a Stanley Black & Decker or a Marriott or others are looking for technology capability through an Accenture, an IBM, a Capgemini, this platform is where we all come together and we find out who might be the best to help our enterprise client move forward. On governance, what we do is when a client, when we help them negotiate a big contract with an IBM or an AT&T, that contract usually is for three, four, or five years. We will help them govern that contract to help them ensure that they have the right value that they're getting for $10 million, $15 million, $20 million a month from these clients. We use a platform we call ISG GovernX, which is a proprietary platform. We sell this on a fixed fee basis over multi-years.
Think about it as a $500,000 to $1 million subscription, if you will, on an annual basis, and it might be a three-year contract. Research, benchmarking, advisory, and governance, if you think about the life cycle, we inform, we provide our data, we help execute, and then we will govern. Now, where does the data come in? My background's from Nielsen. It was all about data. Our firm is all about data. Our database is rich. Clients come back to us time and time again. They want access to current information. This is not survey information. This is real engagement data from the largest corporations in the world. We put it all into a black box.
We then spit it out, of course, anonymously, but we can be able to tell a health sciences firm where they stack up in applications or where they may stack up in their network costs versus their peer groups, et cetera. We put all this together, and this data is our special sauce in our firm. Now, our unique position is we sit in the middle on the left-hand side of this slide. These are the global enterprises, the Stanley Black & Deckers, the Pfizers of the world. The right-hand side are the tech providers or software providers. Think about the Salesforce or the ServiceNows or the Accentures or the IBMs or the Capgeminis, HCL Tech, et cetera, who are vying for the enterprise's work.
We sit in the middle as a third-party independent, not attached to anybody on the right, serving our clients on the left, helping them build an ecosystem of technology partners that can help them either outsource some of their work, help them become more efficient, et cetera. That is our unique position. Because of that, we're able to kind of influence billions of dollars a year because of that influence that we have, whether that's through our GovernX, whether that's through our engagement, or whether that's through our benchmarking. We come across over $200 billion of spend during the course of any given year. That is our independent positioning and why clients come back to us year after year. Here on the ecosystem, you can see what the market looks like. It is big. The managed services market is about $125 billion. We have a 50% share of that market.
If you think about the kind of sourcing that goes on with those firms, if something is going to be advised, we have a one-in-two chance of doing that work for the enterprise clients. On the right-hand side, you know that the software environment is continuing to expand. It's big. It's getting bigger, and we're playing a major part in that role as well. Now, here's an example just to give you an idea of how we operate with our enterprise clients. Here's an example of a top manufacturing company. The initial request was to come in. They had $1.2 billion of tech spend. That tech spend across all kinds of functions, IT, finance, procurement. They asked us to come in, benchmark it, and compare it to a certain set of industry peers and broader peers. We found that they had a big opportunity for savings.
We charged them about $500,000. It took us about two and a half months to pull all of the data together that they had and then do the comparisons. We found that we thought that we could save them somewhere between $50 million and $100 million if they wanted to proceed. They did. We did a number of things in box number two here. We helped them around our research and network and tech modernization and sourcing. What we ultimately ended up with here as a client over three years, we received fees of $12 million. They had savings, hard savings of $90 million. Because of some of the savings they had, they had a brand new revenue stream for this client that's now generating over $100 million.
What starts off as a benchmarking or an assessment of a situation, call it this case, $500,000, can be a terrific client over a period of a lot of months and years. In this case, it was $12 million for this client. Very typical kind of life cycle that we work with our clients. We have kind of two sets of revenue. We have recurring revenue. That's revenue that we know at the beginning of the year we're going to have that year. It's up from around 35% or around a third of our business to close to half today. That's 47%. That includes things like subscriptions to our research. That includes licensing our platform, like using our GovernX platform to help govern contracts and large multi-year contracts. That comprises almost 50% of our revenue. We also talk about recurring revenue.
This is revenue that for the client base we had last year, what would we expect to generate in revenue this year? This has held pretty steady at 80%-85% every year for the last decade. This is saying that all of our clients from last year, we know we will generate 80% of our revenue this year from them. It might be $3 million from Marriott last year and $5 million this year or vice versa. We know as an aggregate, we will receive about 80% of our revenue from that client base. Very good in terms of stabilization of our revenue. Now, in the industries I mentioned earlier, we serve 20 different industries. We picked five or six here. As you can see, of the top 15 in each of these industry segments, we serve 10, 11, 12, 13, in some cases of the top 15 by revenue.
We also have great ROI and great recommendations. 96% of our clients would recommend us, and that's why they come back to us year in and year out. Now, the AI opportunity. We're bringing our trusted independent voice, I think, into one of the largest technology shifts that we've all ever seen. We know today that at least one out of two, and now we know it's more. It's surprising. Everyone might say, "Isn't every company doing this?" Surprisingly, no. One out of two are working on a roadmap around AI. This landscape is going to get quite large by the end of this decade, and we're going to be a big player in that. This next chart will show you how we're thinking about playing here. Right now, we're playing in three different areas. We created an AI advisory unit.
That unit helps with clients and having them understand what their strategy might be and how technology strategy might be and how AI plays into that. We know that with our ISG Tango platform, that almost every transaction that is occurring has an AI element into it. The reason it has an AI element into it is because you can save 30%, 40%, 50% or more by automating, by using AI as part of your solution if you're an enterprise client. We help them understand how the AI ecosystem is working, who are the emerging players, who are the traditional players that are using AI and leveraging it to your advantage as an enterprise client. In the middle, we have a lot of AI research that we provide around software, around technology providers, and what clients are doing in enterprises. Of course, we use ISG.
Inside ISG, we use AI as well. Our platforms around GovernX have intelligent contracting involved in it. Our AI platform around Tango for our sourcing has in it. ISG GPT, we have a closed system that we can utilize inside our firm. We're looking at advisory, we're looking at research, and we're looking at using and are using AI to our benefit as well. Now, if you think about the competitive landscape, who do we compete with? There is no one competitor that looks like ISG, but there are certain competitors or peers out there that do segments of what we do. The number one competitor that we have is the large procurement departments in these big corporations worldwide.
Their answer is, "Oh, we can do this for the end user who might be the CIO or the COO of the firm." Our answer to that with procurement is, "Look, we'll partner with you, but we do this for a living. We have a database that goes way beyond your firm. You can have access to that. We can benchmark, et cetera." On the research side, think about Gartner. That is our biggest competitor around research and benchmarking. On the advisory side, we will run into the audit firms like KPMG here in the United States or might be PwC over in Germany. On the governance side, where we govern using our GovernX platform, we might run into some small technology players that specialize in certain bits of software. Overall, our number one competitor is procurement.
In our view, let's take some share from the procurement departments, and we'll be in great shape. We also are known as the authoritative voice of the industry in the whole area of sourcing. Each quarter, we get on a call with, we call it the ISG Index. We've done it for 87 consecutive quarters. We get 1,000-2,000 people on these calls. These are the industry analysts that follow the IBMs, the Accentures, the Cognizants. These are the technology providers as well. These are enterprise clients. All they want to know every quarter is who are the winners, who are the losers, where is the industry going, where are the contracts, who is earning them, who is gaining them, who is losing them. We report on all of this.
We put this index onto our website after we have these index calls each quarter so that the industry can access our data from our website. We do this primarily so that we keep our brand in the market, and we are known as the authoritative voice in this industry and have been doing this for a very long time. The last slide that I'll cover, and then I'll hand it over to Michael, is just a comment on our culture and values. We have one of the lowest turnover rates in the industry. We do because we offer an environment, a cultural environment where everybody can innovate, everyone can be an entrepreneur, and they can operate in multiple industries with leading-edge technology. We can also do it because we make everybody an owner-operator in our firm.
When individuals come into our firm, especially the management teams into our firm, or when we do an acquisition, we always have stock as a component of our compensation or a component of any deal. That is so that everyone can operate as an owner-operator in our firm, and you can see some of the great recognitions that we get from third parties around the world. With that, let me turn it over to Michael, who will kind of walk you through kind of our strategic growth plan and our numbers. Michael.
Hey, thank you, Mike. Again, thanks everyone for their interest and for joining us this morning. Hopefully, some of this slide is going to feel a bit repetitive because I am hoping what you will see is that our growth plan is very much tied to the strategy and to the positioning that Mike just laid out.
First and foremost for us is that recurring revenue stream, as Mike highlighted, in the mid-40% to upper 40% today with a target of 50%. That is a key pillar of our growth plan as it gives us stability, it gives us backlog, and it gives us visibility. Second, Mike touched on AI. We did a rebranding and a pivot this past quarter, really the quarter prior to this one. I think what was important is that we have been investing in this now for over two years. For those of you who remember, ChatGPT really came into the mainstream market at the end of 2022. We began an immediate pivot at that point, investing in and certifying all of our own advisors and resources to be AI-ready. We have put a big investment behind that. That is a strong piece of our growth plan.
Third is, Mike mentioned the ISG Tango, our AI-powered platform. This really is just a further investment on our part to keep us competitive and to move us forward and ahead of the curve from the sourcing market. Very important piece of our growth plan. Next, obviously, the digital and business transformation continues. AI is only going to accelerate that. This next one is really the expansion of our portfolio services. I think this one is actually very important. We've talked a lot, for those of you who've listened to our calls, on things like change management, training as a service, movement in HCM, all these areas that technology is impacting and creating change creates an opportunity for us. These are exciting opportunities for us and our growth as we go forward.
Lastly, we continue to leverage our ISG Flex, which is our ability to staff and deploy people from anywhere onto any project. That's really helped us to support our growth. You've seen it also reflected in the utilization levels as our utilization has improved significantly over the last few years, and in particular, the last really four quarters, as we've been able to use that flexible staffing to staff people on projects regardless of where they are located. What this has translated into, and what you see in front of you here, this is really an important slide. In October of last year, we divested of a business unit, our automation business unit. What you see here is really what I'll call the restated revenue numbers showing our ongoing business excluding automation.
What this demonstrates and shows is really a business that has been stable to up over the course of all four quarters of last year. Again, if I think about and you look at our guidance for the current quarter for Q1, it would be a continuation of this trend. A solid and stable business that's showing the improvement that we want to see on a quarter-on-quarter basis. Shareholder returns is an important part of our story. Really, two main components you see on this slide here. One is our repurchases. We are an active buyer of our stock, given we believe it represents significant value at current levels. You see that here. The other is our return of cash to shareholders via dividend. Since 2020, we're excited to say we've returned over $80 million, and we expect for that to continue here in 2025.
From a capital structure balance sheet perspective, we have a solid balance sheet. End of last year, $23 million in cash, debt of $59 million. I'm happy and proud to say that we reduced that debt over the course of 2024 by $20 million. We came into 2025 with a very strong capital structure, cash and debt for us to run the business and to operate. Lastly, on just why ISG, hopefully what you've taken away from this is, one, first and foremost is the market share and what I would call the data moat that we have. We have a competitive advantage with our benchmarking data. The market share we have, the 20-plus years of experience we have in the market, positions us extremely well. Mike noted the customer advocacy. He noted the reoccurring revenue, that 80%.
That really tells you that year in and year out, we have these same customers. They believe in us. They see value in the work, the ROI that we deliver from them. That's extremely powerful in terms of growing the business as we go forward. Hopefully, I outlined for you when I started the pillars of our growth plan that we've put in place and what we see as the drivers of growth over the next 12, 24, and 36 months. Lastly, I think we've shown that we have a very methodical and disciplined return of capital and use of capital, which I think over the medium and long term will continue to create shareholder value. With that, we'll conclude our prepared comments, and I'll turn it back to Mark. I think we've got a couple of minutes still, so we can open it up for Q&A.
Thank you very much. As a reminder, if you would like to submit a question, just click on the Q&A button at the bottom of your screen. I wanted to start with the question of the day, of course, around how clients are behaving and acting. I thought the earnings call was fairly upbeat with the feedback that you were getting from clients. Maybe you could sort of share your thoughts on what you're seeing since the beginning of the year and how the macro and political environment has sort of played into that at all. Yeah, good question, Mark. I think what we communicated and what we're seeing first here in the United States is the macro environment for the last 12, let's call it 18 months, has been a bit challenging, as all of us know.
What we're seeing now, I think, is once the election was settled in the U.S., became certainty what we had. Of course, there was a lot going on, the tariffs and so forth. I would say that from our client base, they have shifted from just thinking about cost optimization to now reigniting their transformation initiatives. As part of that transformation initiative is because of AI. They know they have to move. They should move with speed. They can't keep holding back. That has begun to open up here in the U.S. What our view was that we will see that growth, and you'll see it in our results starting in the Americas in the Q4, which we did. We saw Americas was up plus 6%.
We expect to see a good growth level in the United States through the course of 2025, and we'll see that again, I think, in the Q1 . Europe, on the other hand, I think will be a back half of this year's story. Again, lots of elections: Germany, France, the U.K. We've got the geopolitical issues going on with Ukraine and with Israel, et cetera. There's still a bit of a cloud there. The focus in Europe is still heavily on cost optimization. They have not shifted as fast as the U.S. has on transformation, but we expect to see that starting later this year. That's how we see the environment right now, Mark. Excellent. That actually, in the AI-related commentary, leads into, I guess, one of the questions that's come in from one of our attendees.
They're asking about how you look at and forecast AI spending maybe over the next 5 to 10 years and how you see companies, CapEx, expanding over the next few years. It's hard to imagine some of the numbers that we are forecasting, frankly. I think you may have seen one of our charts. We think that there's probably an incremental between now and the end of the decade of $175 billion of incremental revenue that's out there in the market to be had. We think that because almost everything that we are seeing with our clients is an AI element. I'll give you a couple of examples. We are working clients want to be able to cost optimize all of their applications. One large insurance company, Top Five, spends over $350 million in applications. They have over 2,000 apps.
The question is, can we do something with AI to take that, shrink it, shrink not only the number of apps we use, but the cost of the applications? Of course, yes. Infrastructure. There are a number of large enterprises that have their own capability centers. Can we help in some way, either help using AI automate a lot of that work? In another way, could we actually sell our capability centers to a technology provider, get some money upfront, and maybe give them a long-term contract? There are a lot of elements on AI. It is just emerging. There is going to be a lot of spend there, and we think it is going to increase the technology spend in these corporations over the next decade. Excellent.
In the midst of the growth that you've highlighted and the investments in future opportunities, I think it's kind of been underestimated how much improvement has taken place in the balance sheet over these last few years, including, of course, as Michael alluded to, following the automation sale. Can you talk a little bit about sort of how you feel about that process and sort of where you're maybe ultimately targeting? Yeah, Mike, will you take that one? Yeah, no, absolutely. No, I appreciate it, Mark. I think that the teams have done a great job focusing on the balance sheet and focusing on things like collections, which starts with payment terms in the contracts that we sign. It's not just chasing someone down. It starts at the beginning.
I do think over the last 12 to 18 months, I think we have a balance sheet that is in much better shape. Our DSOs are much more in line with traditional service organizations. I think that our objective going forward is to continue that. I think we've seen a lot of incremental improvement. I hope we'll still see incremental improvement. Probably won't be to the magnitude that we've seen in terms of the reduction in DSO, the paydown in debt, et cetera. We are looking to continue to use our cash in a prudent manner to create shareholder value, whether that be returning via share buyback and dividend or the continued improvement of our balance sheet to just position us to be on the offense as we move forward through what we think is another significant spending cycle.
Mike, you make comments on the industry verticals which you work with, which is certainly across the board. I wonder if you'd talk a little bit about what you're seeing as far as maybe some of the leading industry as far as current activity and maybe kind of leading the way on the offensive investment side of things. Obviously, there's going to be some leaders and laggards, but maybe if you could sort of highlight a few industry verticals that are sort of beginning to take those steps toward AI and investment spending again. One of the biggest, of course, spenders in technology is the whole BFSI or banking, financial services, and insurance industry. That has taken off. That had been a bit of a lull the last year or so. They have now begun to spend again.
In fact, just looking at our numbers here, last quarter, up 24%. That's high. If you look at energy and the utility industry, think about AI and the amount of energy needed. That is up, and that is high. Last quarter, 22.8%, call it 23%. Health science is just under 10% in terms of growth. Manufacturing is up, except for auto. Auto is not up with the whole issues going on in the automotive industry with EVs. Hot, not hot. Now you have the tariffs possibly factoring in there. You have media and the technology side was up 17%. We see the public sector, not federal in the U.S., but the public sector on the state and local levels. Here, we also see it in the Ministry of Defense in Italy and in the U.K. and in Australia, all beefing up spending.
Those would probably be the hot industry verticals that we see right now, Mark. Okay, excellent. We are at our last moment or so together. Maybe we can sort of turn the call back over to you for some closing comments. Great. Look, we are very excited about the direction of ISG. We are right in the middle of technology disruption. We are right in the middle of several industries going through their own transformation, like the energy industry because of the whole AI movement. We are right in the center of it. We are ready. We believe we have a great future ahead of us because we are in the center of everything. That is why we call ourselves the AI-centered technology research and advisory firm. We are excited, and we think there is a lot of good things happening over the next year or so, Mark. Excellent.
With that, I thank you so much. Thank ISG for joining us today, and thank all of our participants. Everybody have a wonderful and productive remainder of the day. Thank you so much. Thank you. Thank you.