HCKT - Earnings call transcript Q4 2018

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Operator

Welcome to The Hackett Group Fourth Quarter Earnings Conference Call.

Your lines have been placed on listen-only mode until the question-and-answer session. Please be advised the conference is being recorded. Hosting tonight’s call are Mr. Ted Fernandez, Chairman and CEO and Mr. Officer. Financial Chief Ramirez, Rob Mr. Ramirez, you begin. may

Robert Ramirez

Good discuss The everyone, XXXX and and thank to us Results. joining for Hackett Year you Full afternoon, Group's Quarter Fourth

are here the Eastern Hackett The Time. X:XX released myself, A answer today over on CFO. and Chairman and Ramirez, announcement Speaking your CEO call Group; questions p.m. press Ted Robert of the Fernandez, and at to was wires

visit our a website www.thehackettgroup.com. For release, copy the please of at

in financial Investor We that this our will discussed any statistical the call the additional not on or website. also Relations in contained is data place of release page

Before that may be a turn in we filings. current future would the difficult over These of performance. forward-looking They information, and are purposes of statements remind future securities making to and we in projections are session, not expected you be for SEC These to only our will the may that should begin, to be I Actual forward-looking point, factors federal and not in would predict statements vary. statements I the risk in relate be contained question-and-answer to results statements involve particularly expectations, with the comments may the laws. and this which to detailed following estimates guarantee about risks, like considered our accurate. uncertainties and At conjunction like assumptions the Ted. which it results,

Ted Fernandez

to also everyone me and our earning you, Thank call. let quarter welcome - fourth Rob, fourth earnings

to comment detailed flow as will overview on do, guidance. As cash the open some to as quarter. I'll I on over turn back we then comments results, well the with call operating it normally Rob

it and go we'll over comments, for our Q&A. We up overview then strategy will then market and open

forma excluding this said, pro million, for $XX.X prior per is a X% last X% REL, afternoon, revenues year. share Rob over this increase year $X.XX, as decrease we've with over earnings of continuing a net operations, from reported So

from transformation our entered operations write-off in as and exclude REL of the working investment capital results Neither of forma digital discontinued we our focus part pro Our HPE. was group XXXX. one

revenues continue led from up transformation initiatives with U.S. digital force our quarters, for be transformation business organization. driving Hackett prior the were group. from Our strong to by Consistent last strategy growth our X.X% and year,

Our than strategy transformation by year and lower-than-expected down XX% from group, revenues offset was EPM business Oracle expected. results and strong ERP, as were results implementation down our which more prior were from on-premise our analytics

our Although on-premise and over strongly result than revenues cloud our guidance. higher the QX will up first XX%, impact continue implementation decline quarter impacted expected revenue

expanded given growth cloud be strategy, revenue to that growth However, the in up in second quarter of will believe group our our XXXX. and we continue this flat EPM channel we partner to

Our SAP group in than we came expected. better

a large and grow of couple but of year-over-year of We engagement International term. continue. which on alignment, than their channel now European quarters, of our will over total project global This these expect portion pressure replace some put and Europe the however, cancellation with longer under the did the experienced that we meaningful next to Europe company our to projects a not apps group to feel consistent QX X% our excludes to expect the REL Software-as-a-Service expected we basis. discontinued transition continue were weaker down capital during and group, improvement XXXX. revenues, working We were the in on SAP's a impact impact and

to our launch of have includes market. our digitize platform, strategic Platform offerings to made IP. We next-generation Leap, Quantum all Transformation highly our the launching the Digital of fully that also continue and and our our investments we believe Hackett to the benchmarking This of go differentiate

will growing with our key and been continue EPA strategy and transformation with key relationships Additionally, RPA, strategic and rapidly digital our to have momentum investments procurement software to along in be. RPA, providers,

impact strategic to our revenue as offerings a leader. yet overall through these significant our accelerated introduction our IP-as-a-Service well certification not growth successful but but of least, our of IP-as-a-Service relationships transformation are as partners training digital position strategy. of and growth, have further have our as Last drivers Some expanded programs and our

to ask on to invest on operating provide details comment I and and further flow the increase let On our me sheet Rob? continue strong dividend and us on generate we in conditions, allowed This also and announced strategy also while cash our release, as from balance buy acquisitions business. press operations. profitability flow to results, first will side, back but Rob we market continue has comment further cash our our stock outlook. fund in to

Robert Ramirez

Ted. Thank you,

quarter As I with typically XXXX activities an this do, with key overview related the of of fourth quarter call, in our an of flow for first the overview along and of conclude a portion I'll results statistics, our XXXX. during cover the cash then an outlook following quarter, operating financial on overview I topics our will the of discussion

Hackett Solutions all revenues call, reimbursable The will Solutions. total my in discussion revenues any company. of represents the Correspondingly, including gross to references separately the will The of to and note Group expenses, SAP Group, and to revenues this purposes Hackett exclude Please references SAP For expenses. results excluding I references any represent regarding net comment revenues, reimbursable specifically financial that

All excludes All practice call information working quarter, discontinued capital capital in been accounted historical recast for practice, our exited to for operations on REL European discussed recast operations our been information as have data fourth comparability the statements. working Investor financial our REL on During which historical of the of page Relations be we European-based has this purposes. posted website. that will exclude discontinued our

cash results compensation normalized pro earnout specifically Additionally, and stock non-cash compensation acquisition-related intangible expense, losses, a results and cost discontinued asset acquisition-related are GAAP. and rate expense, and exclude as compensation cash a purchase service-vesting XX%. asset forma non-cash such, amortization reflected XXXX relates adjustments, non-cash expense contain impairment Acquisition-related tax of as to of the under operations the expense, assumes consideration references primarily and that portion to expense cash compensation for acquisitions requirements, of

operations per Annual EBITDA move an I earnings of Pro our share revenues increase were net quarter would of the XX.X%. our over prior few increase like fiscal fourth compared fiscal year and X% the of results to results, from for a increase XX.X% forma Pro $X.XX I discuss an in diluted over $XX.X prior XXXX, X.X% an XXXX to $X.XX $XXX.X to million, totaled represented revenues. XXXX. year. for fiscal highlights in forma was year continuing regarding annual of net Before million,

a our million basis. on after year. shareholders. of will was dividends shortly The paid dividend We we declared of a utilize During to fiscal our in strong fiscal return $X.XX XXXX, total semiannual capital $XX cash end semiannual of our from declared share continued and pay to to operations the flows December per

we approximately million. of repurchased In of the XXX,XXX stock total a company's price at $XX.XX for addition, shares approximately $X.X of a

our results. fourth quarter In of terms

net our of was of For a decrease excluding the of X.X% fourth the prior The expenses net $XX.X revenues million operations, guidance to are Oracle growth by growth X% in million net of total a was in which EEA an ERP, led the revenues for were the the primary of was from XXXX revenues we our within were from a fourth million a reimbursable and by up range. revenues. quarter by revenue in Hackett were continue gross passed X%, revenues, the company than compared X%. Oracle X% X% fully business, continuing by Including lower-than-expected revenues as projects implementation down, when on client expenses, X% XX%. which experienced XXXX, quarter Reimbursable was reimbursable year. compared by strategy decreased Net Reimbursable year-over-year approximately margin mentioned. fourth to to gross strong primarily for business U.S. to expenses, as current to revenue basis. on-premise also decline the that analytics quarter fourth or of XXXX, impact Hackett Europe, XXXX. SAP U.S. project decline. the progress associated with Ted cloud quarter, represents or as This to decline quarter down exceeded of on-premise revenues on in and The our expense EPM impact in higher-than-expected X%. quarter on-premise and through growth profitability. expenses were increase International on Solutions, year-over-year offset EEA, revenues on expected; has no revenue Group, fourth make travel-related lower the revenue due $XX.X excludes It revenues company to transformation $XX.X ratio

be QX of to to Ted last XXXX, ERP group expected. quarter, QX, due comps than lower from in but strong revenues Oracle down expected came EEA as in in However, our were mentioned on-premise

on-premise basis, [ph] XX%. implementation resulting growth to be However, now excess continued is of a cloud which mix to our continued revenue on the improvement year-over-year from of cloud revenue, approaching XX% in

AMS, reseller, impact XXXX, is decrease million net expanded mix, in to Managed or Solutions of Services As focus to transition Net to decrease software on-premise we on other our our second quarter our of due SAP Application primarily Group, a improved from totaled EPM basis. result the a general a groups, our EEA be revenue on up consists fourth partners, cloud-based $X.X SAP XX% the revenues which of XXXX. and quarter the in of this implementation of from flat with of along year-over-year expect to offerings. The

international the fourth approximately to More from revenues the net XXXX and importantly, in company continuing accounted are XX% this XXXX. company expected group's results of first for of by are of quarter quarter from Total revenue improving net be total and XXXX. down operations X%

the compared was for totaled Executive our fourth revenues company quarter at and as groups, to quarter the profitability company Advisory forma net XX.X% on-premise end at Total in revenues million XX.X% fourth prior revenues Total recurring in was gross revenues XX.X% and the the XX% as XX.X% in company group. million; pro Total earn-out XXXX in and X% million decision share SG&A resource which the XXXX asset of acquisition period Solutions' in margins margins primarily net and $XX.X fourth total $X.XX XXXX fourth fourth the revenues, strategy quarter net liability our an the our Our of HP discontinue forma million, cash our XX% year-over-year XX.X% on the Total pro in represented as to also a XX.X% of quarter in $X.X margin for impairment year. on income quarter quarter in X pro of in the the the X,XXX for included quarter net XX.X% implementation cloud gross as of the or comments assume fourth offering; our rates. income of include expenses, or XX.X% of XXXX million guidance, end was tax the expense excludes AMS of $X.X XXXX. software excluding Total $XX.X we in $X.XX our cash in fourth intangible gross of revenues quarter a our the EEA loss same fourth fourth of to or or rate to million pro totaled incentive forma earnings asset of as basis. diluted of U.S. Group the of forma and to amortization compared fourth tax our revenue and of and our the forma million our forma business per pro transformation fourth compares sales, to for last results XX% net of in quarter quarter company increase quarter to federal of in long-term which reimbursable related share XX.X% as diluted forma the net XX.X% consultant of in of net of in headcount company compared benefit pro of cost in per results pro quarter compared decrease of Practice the to migration long-term expense a quarter an to as XXXX, quarter's net rate of of of stock-compensation was pretax net income Hackett operations U.S. revenues, million. of revenues, million previous with company was compared year, the was net Pro compared compensation the of XXXX. company $X.X forma of our net of which forma for in represented $X.X practice on of XX.X% as $X.X revenues and Best revenues a Pro pro higher quarters, as million sale year, XX% year, of over in and million $XXX,XXX; These previous per Consistent respectively. accruals respectively. quarter same to fourth net the quarter. midpoint compared net quarter at and represent EBITDA forma the of cash accounted the diluted for $XX $XX.X $XX.X XX% which the primarily fourth was X,XXX Pro group. to of which result $XXX,XXX. X,XXX due of forma XXXX last an statutory fourth prior the results SAP fourth to $XX.X from continuing the pro the share, previous forma continue total year. or

or of fourth equity expense, on related to operations HPE million of include REL capital was for loss million discontinued or $X.X forma of the company's related our from assets $X.X primarily XX% investments and from included exit write-down to quarter pro the GAAP Our fourth relating $X.XX a quarter business. XXXX. $X.XX to for its results XXXX the in return working

the and a benefit The no $X.XX earnings diluted liabilities previous were in $X.X capital enacted non-cash by quarter by quarter. revaluation GAAP debt and GAAP offset cash fourth at in strong result was $X.XX repayments increase per to to the operating per included tax the the of in share provided flows million, fourth was primarily by XXXX. of of $XX.X actions, of expenditures. fourth quarter as was company's the in million operations, balances were - a of due income XXXX there the late quarter The cash quarter at XXXX primarily end end Net adjusted As activities driven cash attributable quarter approximately to the of the fourth which of deferred fourth share million items. $XX.X net XXXX. was the the cash impact from the of of earnings of for result for the legislation as tax compared these

days quarter quarter fourth DSO Our days prior days the at in was of at the outstanding XX the of year. sales end end to previous compared and the XX or days XX the as

to target be below We continue DSO days. XX to

Digital capital to which to had Quantum the During X the laptops, Hackett which currently to capital Transformation systems; fourth the expect Leap; global to and of quarter to Institute million return the and rollout expenditures company of XXXX, of Platform, related levels expenditures, corporate key years. the in We occurs $X investments include $X.X every historical XXXX internal primarily initiatives, our digital X of million $X million. our

the company During quarter $X.X was at of The its million end company's the the of from quarter, debt credit balance the outstanding facility. paid down fourth XXXX million. the total of $X

$XX.XX cost company's During XX,XXX an the the stock the quarter, purchased at total for shares a cost company of average of of share. $XXX,XXX, per

$X.XX paid per semiannually. of Directors to year from company's program Additionally, per as annual to an most year, meeting, in Board the approved dividend increase company's $X.XX the recent be

I to like everyone move seasonality move of to quarter relative of remind the first XXXX, to we our to QX from QX. I guidance costs of would for as business sequentially the Before

with guidance previous consistent vacation years, buildup our the quarter payroll-related in first taxes will in first and increase quarter for Specifically, our reflect XXXX the U.S. accruals. sequential of sequential provided

the million $XX.X the the range As be a this total X% such, year. guidance, to end from net quarter previous of high first revenue represent to of XXXX company in at million, for decrease the estimates the the would $XX of

delayed are X%. the of Hackett timing to X% start and We year-end the of Solutions impact holidays to be of to due rate year. first to expect this and down in These X%, significant decreases by SAP a primarily both scheduled approximately approximately begin is impacting occurring the projects impact January, of the which our of the with week portion consulting growth in several

XX% Our for higher average the January. billable hours for approximately February are average than

range be We revenue of to in for the expect estimated to X% of through this run includes the gross to company million. gross to The improve guidance revenue continue $XX estimates expenses. million The an rate $XX.X reimbursable quarter. balance the

XXXX We EPS in first represent range pro year-over-year This to earnings diluted be high share $X.XX, forma in range. end expect the of per of X%. a would of of our the pro quarter this to the in forma $X.XX decrease

We to approximately pro be expect gross to net revenues XX% on margin forma XX%.

be SG&A first expense pro and $XX.X to million. We expect forma quarter interest approximately the for

We expect net first the EBITDA quarter on pro be forma range XX% revenues of in approximately to XX%. to

payment activity, the our to declaration that payment to sequential be on triggered fourth a for back We quarter excluding expect vesting shares. the At due was and first over withholding to would share priorities tax net quarter basis buyback market in impact cash and the turn of of the employee restricted like months. XXXX outlook review this XXXX strategic of performance-related paid the of dividend of to coming to Ted the of early balances, payment point, bonuses, our the income I by down it

Ted Fernandez

Thank you, Rob.

As forward, environment, me we our on importantly, demand opportunity it significant and growth on let our the more thoughts reiterate offers organization. the look

business development to competitive. As sequential models in order functionality industries the with Digital their transformation applications fundamentally accelerated rapid improved user and enhanced I've and to to mentioned dynamic is workflows entire enhanced these Traditional, are change previously, events services. and automated at with lever fully along RPA businesses influencing adopt way networked pace, compete intelligence, to redefining intelligence. new changing and the an linear-based forcing and remain artificial automation, experience, and mobile is in cloud dramatically organizations capabilities

reiterate important very with opportunity the be brings transformation that So for results, especially in continues us, digital significant. to it's line this think I to

are of that's off before the the digital technologies to not the activity changing and of resulting environment. legacy does in increased In it on-premise not ourselves as transformative how excuse, these us. us companies to are an However, opportunity determine big U.S., to respond that revenues that competitive quickly without part come having transformation wean

prospects. engagements seeing the We cloud improve growth transformation digital growth in our are and

January to as engagements Rob of transition as as look our from Our growth and the is us for our adversely is cloud our critical own and building of results as our in will vacation holding during client’s total has said, area, as experience also resulted we the momentum the impacted -- in and clear. the our digital of time grow -- the that complete on-premise But -- associates, that revenues, solid company and smaller later is is QX resulting and into we BPO- clients fell and become as Europe, are which continue our in transformation he benefited our digital transitions first our commented, have of specifically be as part with week on-premise we some revenue week the the RPA-related With this said, investments. did favorable quarter becomes day and QX, although transformation revenue Europe a weakness benefits to which is we first quarter, mentioned increasingly very in continues majority a QX, as part impacting quarter, throughout New which the our Year's weak in our the the increased in overall our EPM-, guidance. to initiatives demand In back. EEA well

brand and capital apply strategically is best to unmatched benchmarking focused strategy order continuously. new to and, build building long-term on in digital Our practices transformation intellectual and fully whenever by digitized, capability possible, to our around continue operating our

also -- initiative which in life the launching us leadership new transformation is this with their was global initiatives, client benchmark typical We're Quantum less Leap, engagements very to benchmarking over our as now to, our our information allows client long-term respective leverage client allows effort our building a where which commits single-year new actually IP the we are effort. multiyear by effort. digital good platform deliver prospects. which the growth revenue Specifically, becoming The of believe more deferred Software-as-a-Service and significantly we to solution. It initiatives to benchmarking track have redefined

further organizational new offerings. to attract to sell our fully partners, allow consulting all to but digital technology we to DTP platform the platform, differentiate and help to closely the IP-as-a-Service digitize expand around help and allows IP to ways, -- solutions. ability is solutions leveraging expand our benchmarking software This how In us Our unique By work our offerings. refer transformational more allow redefining will change and them it be will many drive allows it as not era. only they these way of should IP our align it, new utilize differentiate to our clients best-practice or with services our we to us our alliances, service allow believe delivered proven DTP, to us us in

These of continuing As relationship ADP increased Workforce in meaningful you know, launched further programs and Now expanded and we've the their into ago our we'd with developed are couple years grow. a current ADP, a to with ADP opportunities platform with year.

partners Given we we programs. believe of about conversations to this We similar clearly to ago. the program, opportunity were will a attract we success that year continue more strategic having other than are

IP We us of use of best-practice that and is our quarter, This membership receipt, as given IP-as-a-Service we and client, nature unique favorable are offerings hundreds alliances. that solutions, as have the conditions advisory our best-practice and high-margin count clients a growth initial well executive expanding the for our this to those and strategic new market to offerings -- clients of to end contract the serve content believe we clients Institute excludes Hackett our us. we in Training our high-growth, had our our certification XXX through we XXX At CGBS, the new our our that continue serve both Hackett and Institute members. the opportunity and in allow

impact on-premise resume rates. revenue importantly, In the scale our even plans business, decline for -- growth and growth. alliances on have the scope, our base QX the offerings higher-than-expected are continue our QX leverage add IP acquisitions believe in though our can early accelerate Lastly, can we our delaying January strategically our that in that grow and to and we we impact look more a to can client capability, normal summary, and that revenues to and

efforts IP, new our the RPA resume focus Platform, and However, and we investment continuing our ability software in Leap, the believe during to cloud, Transformation long-term our relative to goals partners all growth of to are in profitability other Quantum Digital relationships and our and XXXX. investments increase in

always, urge and As stay their efforts them available highly the always tireless for people associates by Those to focused let my our our thanking conclude opportunities me clients, on our our exciting to organization. comments. close and

me our move so turn to Let it Q&A that we can the of section coordinator into over our call.

Operator

Thank you. [Operator Frank from Instructions] Sir, open. Our from first question SunTrust. is is line Atkins your

Frank Atkins

much. the you for taking about of Thank top you ask about customer my talk to relationships opportunities wanted the little questions. Can the very those five first Thank and a relationships. there? you growth health I bit

Ted Fernandez

Very there's level The continue but into probably a of five, I some rotate not strongly probably maybe largest ones XXXX, strong. somewhat once year, do. them. those very They all two can

the those my The but relationships very are I to believe the significant it other of with three, I client off top say wouldn't head, organizations strong. want

Frank Atkins

what you little that wondered bit sit so the and just us give see, I based back That's a frame versus the dynamics and the kind a the or a going year then Okay. last helpful. dynamics on-premise? forward? then And maybe of cloud And those you size and going over if could trajectory see of of bit you forward and of little

Ted Fernandez

you as allowed Okay. business just strong the growth it the was first us our that to important most net for positive. time growth, thing QX, recall, Probably had Thank very though in we you, was slightly grow that was it even the and EEA that Frank. us fact

experiencing net cloud continues really opportunity The that extent, our the us. I QX. through strong that is is opportunity disappointment it as think we to that, some growth growth fact were behind we that thought was

-- I on-premise positive. being we to which think to only decrease decreasing in Because in that QX guard, and up to perhaps it see a into what year-on-year is the was we at thought look was. the were had percentage is obviously QX, looking I kind forward of with I revenue. nobody The the it when mean, strongly part I very XXXX positioned you as an it off fact know, erosion more that we why only and disrupts but not happening, QX to disrupted that started we I'll revenue, that really best is thought try blip. it our a has flat calculation both not up from just amount both and really caught and have than was QX the the that now -- group, decrease of to of any of up and that of overall false the us amount the QX. continues ended any comment be as on-prem QX, how organization us therefore, It decline the wasn't around to for was that the activity QX in combination cloud to growth percentage have in as

disrupted a is quarter delayed or disappointing. that at to have least So

I is larger new which software would by are all cloud revenues being continue there a area, that applications. couple. of companies no on, their influenced doubt significant give the to why, have in software efforts spend new made who their the the that are money some those on-premise the to One, clients, fact reasons into are you and that development As putting most

becomes -- investment increasingly of difficult for instead the organizations investment cloud on So significant it those migration strategy. develop going those it starting is to to really knowing some make on-premise where

the can clients them then not EPM either, narrower of that convinced, or perhaps and and companies a, in some, HCM are through very say, effort large call quite between get that ready those would core Oracle initiate the the some their if like world. to for to solution of business to software you the client scale, our apps across point make integrator them, our primetime with or platform encourage some cloud the investment it, ERP more comes be they're of therefore, a would at commitment to really those boy, Now cloud

way that So whether a that be the brand-new an seeing or we therefore, different increasingly going developing whether back into HR. are those we going, that there, an once dollars did to an than why a areas, be a combination HCM competitors model, think their convincing different with new put reemerged so software they fact vendors and customer dollars business now and the where EPM as around you're are than saw tried the solution the to no emerging those point they migrate time of no are HCM and fact upon after becoming as of Salesforce Workday

which those would position create to that the us client we so if opportunity they the of follow seeing more a regardless I have And going us, the bigger can in call for active we we it, that pursue, dilemma, XXXX ignored but we're actually creates in you kind that, alternatives we're dilemma competitors, of if you aligning than is we additional if the for the with space, that for the options emerging those a don't environment. hope space, well. provide me of, -- has new to. be If both like of some And around I'd EPM in some the by in want for believe only seeing create other color, client. HCM alternatives. it glad to Frank. think doesn't comments I know same that as creates alternative as it provides to I so, not actually some you'd know a that many

Frank Atkins

last the balancing repurchase in how of then bit Yes. little forward? Maybe M&A allocation No, do that? What the a the Can you outlook? helpful. very dividend going kind and that me. you you're with see was for one And capital talk about

Ted Fernandez

limited strategy you believe With Well, transformation over continue might prioritize that's there a to and dividend are we that to we an we and highly buyback were more the -- said, digital IP - complementary the would that acquisition think. that than have. assets that continue if we to

So or few very those are without having could always rate. we're on percentage, growth affect exist, you not out on-prem opportunities technology side, which that to their there -- but considering the long-term enough we whether could assets meaningful there some is get

and in look that us So very we that more keeps organically. at that cautious space

and dividends us, and here dividend So then free percentage flow. based acquisitions -- are of buybacks a first, are for cash as based simply

they're that expect we simple the also you CapEx dividend at simply the flow us very to -- our increase So the with operational dividend be $X.XX, we to to that buying future. that if stock, those our to to in that opportunistic. with in extent stock investors $XXX,XXX year, we've area we've we'll buybacks, of believe back then try our fairly we increase allow million, to the we decrease when that is consistent is the free we in $X not them, for that know We approximately million Relative do but $X do to then cash not so or one. very a continue to been our investors think been past, not priced the to the many by know continue try look alone which is in compete that at you look and fact appear, aggressive

Frank Atkins

you Thank very much. Okay, great.

Operator

Thank you.

(sic) Next, George we have Greg Sutton Sutton Craig-Hallum. from

Your is open. line

George Sutton

So about guys, we talk as I into premise wanted head mix year. the versus to the cloud of

where But impact. side you to cloud and Do of obviously, your year? So more become I'm this feel of we expecting them we Should less growth -- on that rates like are you develop specifically, continues opportunity? really a curious as be? it's start your to becoming as to the part less cloud premise impact an out win you weren't do to the continue to see significant would

Ted Fernandez

our reaction is My never win enough. first rate is, first, high

our opportunities thing make and delivery global X XXXX close that very think think, those ability that needed we we means or where to I and significant or in the learn impacting strength second, scale we nothing. for sure did us relative deals one where came X focused not go our ones we I second had, we alone to was However, because after

said, want mentioned Rob that applications that Oracle XX% script, to through total continue his of our apps route. With as didn't cloud-related in we now So are engagement.

So you that, that grow continuing very we're ERP actually clearly side. tell nicely. to the I in mix is greater would cloud also

XX%, we XXXX. but on-prem. cloud bought we is XX%, probably cloud; group that Consulting XX% If pipeline, you Jibe a May percentage in had that of now group, And approaching recall, nicely. growing was and very With perhaps strong

OpenWorld. named percent. we're the influence we weaning one lower ourselves, term, Partner fact, strong, Oracle lower since very past It's for group this has a and in XX% of the large we had number on-premise EPM of probably been and, of base EPM such partner again the Our because for Year a in a better were the Cloud lack

a we progress. So that making aggressively to we're like cloud more than would We growing be look, side are.

looked said, growth cloud also on model With we cloud didn't and has extent, a to what growth and We into we percentages strong. the some that had QX by that are to misled I stabilize, number. We QX. smaller decline achieved modeling higher we we're believe that we're very a it high. percentage was because in smaller been very growth cloud that a revenue. had We but we going QX, expect little simply realize the on-prem guess strongly start will then percentage a to We're

the I Rob if excess wanted, But last masked don't well conservative XX% business growth that we look at back of George. that has mix it to that's and strategy which flat Rob being the group, into QX, to of which will QX be our try that and hurting really importantly, look up our that we results, to up quarter, is really you also just transition. that more say... when and of down the we As transition with said, more I rate at ends strong current of in growth, run more that -- QX our exit if we the as as and XX% mentioned business Rob in was said, we and be than to believe, going overall performance months. XX net this and over if position group EEA, transformation way group know the should

George Sutton

actually, question, planned. you than I Actually, a gave I'd and more detail even terrible asked

So…

Ted Fernandez

Okay, were it me, I hey. business the that grow opportunity little than told not may planned. as also one say it back to has who publicly a to think. the know is answer be, you George. our you should takes our this but diminished And bit longer just Ted,

George Sutton

cloud are simple. transitions to never Premise Yes.

I and second want make what my So behind last write-down. question just relates understood to sure was to the I that. HPE

expect we We expected us just event? you on necessarily that REL, HP. Can some clarity give didn't

Ted Fernandez

primarily looked we continue to our were and and -- Well, as critical was built we at know, were was it you where digital to both transformation that X complementary everything years as that really invest, which, about ambitious we doing X ago -- a dashboard our HPE, thought to growth, SAP. very as at we was Oracle extraction we looked and would be highly plan not to

and continue for security security and under that to that increase clients, the and reduce that Leap As Quantum continue continued of clients of we as already concerns because functionality security pleased significantly we were and in within their delivering. were that making GDPR totally requirements market requirements, realized, functionality time we were we product to with the that Quantum as integrated Leap, functionality and value improvements extraction had asking and very out the their how the

not So support it, it's product, from both shift; of we since non-cash a expenses looked invest this secondly, the and we of said to that a we is strategic. operating at said standpoint, from continue depreciation kind we and to some

rapidly our Let's move that resources growing. on can things so on we are focus that the

George Sutton

the Understand. Thanks perspective. for

Ted Fernandez

George. Okay,

Operator

Roth Martin Thank [Operator Partners. Next, Instructions] Mr. from we you. Jeff Capital have

Your open. line is

Jeff Martin

guys. afternoon, Good Thanks.

Ted Fernandez

Hi, Jeff.

Jeff Martin

on in moving this beyond you could an Is I caught by that that was bit was something that transition opportunity if an little something still that a this the opportunity If surprise? client comment Or Europe. at wondering year? more that's is you point? if

Ted Fernandez

with had of was was engagement they that was knew simply which decided into of that continue significant one, firm go engagement Germany there it to that Europe a latter the where a that in significance portion is -- No. that to that -- phase. Actually, local European continues to us client one a kind with client We at risk.

client, or questions time don't was I mentioned never we -- and surprise, reason, total we all it who of was as a don't a quarter. to was used as get got I discontinued which a bank the breakfast ever and know simply one, surprise it -- the meaningful. our and a we've it but asked was part I second mean, That fourth The effort that a the was the latter

jobs could best I I nearly the when rate European both from the of results So half mid-February. in look is of at I those you run tell the we get guess thing last replaced run rate we as probably have into contribution that already year, that

two the with very and it able if recovered as here engagements my rate growth do a normal said our we few on the but in those disappointed to So hasn't is be goal of to first pressure comments, quarters, little I consistent European bit us expect resume organization. group entire fully we'll the from their

Jeff Martin

your strategy XXXX. your to to comment Is say, back in rate quarter back fourth the the comment regarding to Okay. in to a then more that, that? to and forth getting on growth And back that do a basis? to expect year-over-year get about you prepare putting effort Or third get targeted around and

Ted Fernandez

that same we're decrease of half 'XX. is swing of definitely we're overall very assuming to the QX. and really you will And -- we happens, If to long-term if No. the if way that achieved larger if call as the in have that, percentage continues believe be to to the continues yes, -- -- remember, if that a way, for our on-premise revenues, effect EEA, classic growth EEA that going time, growth of if at results we're want -- strong adverse if we we're back in the our momentum decrease happen within since in it, is that rate goal second that modeling

Jeff Martin

how are And seeing in around smaller And question the with to I'm within competitive out seeing fees is small that competition -- the Are you are better Okay. firms consultant more dynamic transformation. ability area. then last making firms? you competing seeing their you consultant larger secondarily, emerging digital there? strengthen acquisitions more

Ted Fernandez

both by -- On impacted business, the what weak that side, our our our you know, and and positioning very January business very, of is QX. strong, we strategy the rate the in It's year think in strength we as no. no, - business, non-tech transformation QX, growth continued Yes or throughout been has very strong. our call but it

which growth we strong. some the see very to had we'd look opportunity, Specifically, scratch we we have significant just we at been surface. When when RPA looked, they very believe in oh, started some opportunities procurement,

some -- our seeing you're firms an to ACM, they we're smaller where eye if support complement if competition of application cloud opportunity highly So right where you our we at APM coming emerged ahead Yes, now, seeing what could diversify add which we're say as what But see recruit planning side their where no, the capability providers, for efforts and it's some on allow continue talent. our us and any to an for clients said me way no, organization doing. to to that would went emerged keep reliance. that's and the some I we and we'll

we they look So good. to we migrate that's want do, those of those those at opportunity, no if see acquisition have to but make and we and think at each see that do we that from. on-prem see sure we do one where to that is we some that We would little we have look

advantage of balance the and saw So if is financial it a one? No. to sheet Do is we have The we requirement? answer take power one yes.

hopefully, that So your answers Jeff. questions,

Jeff Martin

appreciate I the call. this guys. thanks. Thanks, transparency Okay, on

Operator

you. Thank

Barrington from from question Research. is next Colicchio Vincent Our

is open. line Your

Vincent Colicchio

January? more the delays in some on project color could you Ted, Yes. give us

Ted Fernandez

in some Well, week you some did of drove the delays of first that first give overall to half -- we're experiencing January. decline it all, extend But in and the we perspective, January. did

linger. just strongly said, rate to we're So - we March. that up it some in it to the run Rob [indiscernible] of did first result strengthen said, clearly unable rate helped that our February run that perhaps was With in into to expect as been hurt January. and XX%, us we continue January think again as to our It week from the for external volatility a was could -- us, track,

be So that my would content.

Vincent Colicchio

were what where, for looking services was -- particular, I in project delays involved? Yes. those

Ted Fernandez

No. board. It the impacted the across really almost delay

two QX. results of at in running related and did end you it tell the want that directly relates Europe. of whether we -- just when we to of -- it, the we call We is QX business for turnaround was at maybe a that So specifically on X/X overwhelm context, to look we ramp that with to help hurt we week. total and of for for call if it and to engagement results, to will strategy -- planning hours and decline first in guided to it you loss lot that rest of when this it two business, We just the wasn't all thirds kind overall the expected call of on-prem you you'll right -- able the that put of then happened But and in those look I cover that, well-defined currently QX. activities. think were where we're expected would billable hopefully number decline will But that kick want transformation, that's if transitions we're in it where hurt, heading, it, the what off that so see the cloud that

Vincent Colicchio

QX? your the into what if second that a you if it you of of out expected had Could in as business So Oracle already mentioned look out you the half the rate - the sense you ramp plays like plays give year-over-year targeted you to get as us can growth if expect. think could year,

Ted Fernandez

do we're the would of look profit bottom range at clearly We're not but continuing that, ready to that yield. that, that relative to the and

and deferral we year. for got look how So -- call that that with get forward would look at activity the a be then a I that. I've also I XX quarter to that at consistent but the fact I'll what could X quickly

the quarter means much plan rolling at stronger it if the guidance I that year. we that the So to XX-month on what obviously I you're we've XX for with forward calendar squeeze achieving QX, trying -- If given know the in feel to then look you try then about impacts basis, that on then X basis, delay, year. a us I it but in obviously, a poor

Vincent Colicchio

wasn't I then clear. And

that for to couple threw cloud said? that the discussed -- you've business, today you related You that's mix of numbers just EEA was XX%? what Oracle. Is The different a out

Ted Fernandez

[ph]. XX-XX. Rob - And that's QX, that QX, is

Vincent Colicchio

you if you type for And improvement adjective the business, year? did Okay. maybe The contribution to then this earnings revenue of what expect -- one an to me. last IP give question and from expect you want

Ted Fernandez

group, total to Well, on-prem from just impact look of go growth, because at to significant some becomes we're you to that year going, if the very as our pretty to current you you it the flat where holding revenue profitability back significant.

continues. we're So on you that side know strategy business and strongly margins, very and running the and where nice very transformation

cloud from elimination just experiencing So the opportunity the to in application impact the new the and the natural on-prem is areas. area, decline related growth we're the that in

Vincent Colicchio

IP your Well, relationship. expect I progress was you this business, do asking year? to your that ADP about How

Ted Fernandez

mean, great I to we're relationship continuing believe I a sound. and value, and we to Solid where asked demonstrate can. that's be

launched continue start believe year. to where and next this that, it platform, decided that every November. especially nicely We to Workforce client one is, values able offering that ADP look it at into So that of Now to portion we business we year, their to we starting if that the the fiscal be that in the demonstrated should grow

in the is agreed agreement -- and that track similar their with for to to business growth. is where they their to offer obviously, for went through their to half as fee fiscal with that client to current have be we have one We desire an desire market. year, we And to we business a that every flat their of have that sold where product clients enterprise actually our the

growth. is entire consistent the have with business desire our So to track their

to We it year. there in get all this of have year. there happened like next fiscal their We'd

Vincent Colicchio

Thanks, my guys answer to questions.

Ted Fernandez

Vince. Thanks,

Operator

Mr. turn time, to further back now questions. call over I like the this I Fernandez. show At would no to

Ted Fernandez

in look quarter. report catching Thanks quarter again. thank we participating when first we me fourth and for our forward to everyone our Let earnings call, up

The Hackett Group, Inc. (HCKT) 19 Feb 192018 Q4 Earnings call transcript