HCKT - Earnings call transcript Q2 2020

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Operator

Welcome to The Hackett Group, Second Quarter's Earnings Conference Call. [Operator Instructions]. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO; and Mr. Rob Ramirez, Chief Financial Officer. Mr. begin. may you Ramirez,

Bob Ramirez

Good discuss and quarter The Operator. joining results. you us to Hackett afternoon, you, thank everyone, for Thank Group's second

questions, released myself, Rob Speaking to Chief Eastern Financial CEO today Time. call press Ramirez, wire the Ted announcement at A your P.M. was of and on and the Fernandez, Group; and Hackett Officer. Chairman over the answer here X:XX

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

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

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

Ted Fernandez

second quarter Rob, call. our you, everyone, earnings to Thank and welcome,

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

of dangerous all to Please have non-stop then call healthcare comments, providers, circumstances, commitment responders, who very and in market successfully work and to pandemic. and would those to and allowing all the then our commend In to requirements support continue. the and I continued first respective conditions and I start the like of this of by review to then to to me of individuals under, and circumstances, proceed varying strategy-related also our remote and adapted we globe. acknowledge delivery in some focus incredible initiatives their us client dedicated and our quickly substantially to allow will spite the notice limited associates that acknowledging our will the during engagements We Q&A. work clients their around

our the all I As the for globe conditions time, is us lives, defined. ultimately normal where to that of eagerly said last exist are around we wait however return to to able

the to a go little Just on provide background back to quarter, let me March.

last I hires, adding the quarter, As XXXX strategic consistent aggressively and our year growth said with associates by prospects. started we

second weaken call information this first weekly peace weather our we global On important to very to the cash our XXth, we communicated believe decisions. our to from March We strong further the of with our challenging entering prepared storm As critical mind quickly strong we position, quarter. associates associates resulting associates the priority. That did but quarter not any were as end we we've as pandemic we our well-being of making any taking from necessary were sure our this top started profitability provide in commitments of cash effects and with to gained period avoid early to the position. long through would we while shared pandemic of know the that a our were that make our and market precautions associate to coronavirus decided on layoffs to only ensure all make March, we safety, forgo with second update feel and but which directly meant the in a not safety we

better volatility understood address prior pandemic continuing of the saw communicated any associate to we we that decisions beginning into quarter. disruption the our associates our decision-making end disrupted third continuing our but quarter. allow -- million the our operating a economic high to informed well prior also need used the with the effective, results, to of fully we credit cash This our and fund update changes at on QX, our Consistent and our actions to, improve the our as operating significantly as the reductions We in we impact to required This charge. as approach, use employee-related any without with. of would client our second balances dividend to charge restructuring maintain resulted quarterly facility severance also will we're as $X us sequential this

afternoon, Now clients $X.XX. the of both This economic that from share forma of on $XX.X per revenues would net to results. onset pro It be engaged and our quarter clear reported the in the earnings we of the and was our disruption we significant services. way operating million delivered

start current we to is virus in delivery circumstance an and group. in increase As in least see were the seen increase services, require the had affected; our client already as implementation their to us transformation have which business our affected. clients place, we to allowing and initiatives strategy more executive impact transformation expected, interaction, technology-related adapt in business This most significant which importantly, were remote Most and and lengthened, projects engagement. services,

allowing extend increasing activity and seeing pipeline which practices, in build engagements. EEA is existing to our client also us are our We

an sequentially, results with to our As sequentially in meeting June year-on-year Group. our XX% over example, Strategy and counts by were the up Business XX%. U.S. slightly down increased decline April and EEA offset Overall, by from Transformation

are this our XX% drivers we will of platform, more us growth with to down The of associates' we continued IP our platform, Europe global and in digital reductions our allowing years DTP, of be which accounted On Correspondingly, for and development needed to highly and Hackett be decided Quantum we results include fully region, aggressive the for overall digitize to approximately our restructuring to our important total or international state-of-the-art platform with challenging have sequentially differentiate our of leading which charge. strongly IP-as-a-service continue proprietary made all Leap, year-on-year. front, the many and our to come. benchmark our be transformation to investments offerings,

note it's case increase desire and have from to had to business last we platforms in Specifically, bolster interest a their license partners' efforts over to potential important value-selling that development months. significant these six the

our investments are growing automation eProcurement, EPM and strategy Additionally, our future be our strategy. overall transformation to with drivers continue growth rapidly and key our also, groups digital to important of workflow

With balances this cash sheet without our On period. continuing our to our first year volatile business. wanted on to outstanding with I we and economic make operating our to second Rob? me comments. the manage to cash strong start will said, in outlook. back strong acquisitions ability cash generate has continue debt. conditions stock following dividend, and properly it strategy fund our ask Rob's the the and market tell ability from future invest cannot on how while important our to I if additional results, finish any This operations on both comment Rob provide to during buy the flow to quarters also and allowed let provided us has us you balance and side, was that to flow and with details comments

Bob Ramirez

Ted. you, Thank

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

Group, this call, of total our International I Business EPM Transformation For purposes separately and our will of the ERP, as regarding Company. financial S&BT Group; well Group, Analytics EEA; Solutions or results our Strategy as or and comment the and

results executive group offerings, advisory transformation America North which and our of includes programs services our the and IP-as-a-service practices. our S&BT Our benchmarking business include

America of Oracle, Group includes OneStream solutions EEA SAP practices. results Our the and Solutions North our

results our Group are International and in based EEA primarily S&BT the our groups that Our Europe. of includes

Reimbursable associated expenses note our impact excluding profitability. reimbursable represent our project In are or net to to clients through revenues and margin primarily revenues please addition, references all expenses no have that expenses. to passed travel-related

During our certain to measures, will provides useful non-GAAP we information reference call financial believe today, we investors. which

filed in release included financial have to We press non-GAAP measures reconciliations GAAP of today. earlier our

are my from based on any today results continuing comments operations. Additionally, --

quarter were a revenues throughout line QX an X.X% with on on-premise second in year-over-year cloud practice EEA, of compared from quarter net Europe. SAP COVID-XX the the ERP interrupted Solutions revenue, $XX.X year. $XX.X revenues and improved to which XXXX, transitioned business Cloud period pandemic practice our disruption the when expense S/XHANA COVID-XX sequentially in by OneStream of of driven million the by economic much for which the quarter. For excess second to prior Specific implementation travel as we quarter Net was we growth discussed XXXX, revenues for from Group revenue period, delivery to on to XX%. to was decrease the when XXXX, year. continue million was our X.X% practices of and increase the our of both disruption remote Net our the same XX% Net basis. our Oracle revenues X% prior reimbursable growth the and expectations our in where of EEA as Oracle is This group decreased the is prior our now and implementation last Group's and service ratio million of our from for $XX.X affected XX% were of were revenues compared as in mix is transformation to quarter a reseller compared XXXX second net and of to reimbursable pandemic model QX the a second U.S. see felt. practices. to expenses in within S&BT This The

of a revenues in basis, of sequential year. the total Net Total XXXX the were Our represents the net of XX% as down $X.X XX% the in quarter expected year-over-year our for International of and for on million prior Group quarter. XX% our Company revenues for second XXXX, the international revenues quarter total currently of XXXX a on in second net the quarter second of revenues in year-over-year to accounted X% of both second discussed and U.S. quarter net as Company XX% compared operations, previous were which decrease a basis. Company

$XX.X year. of approximately million the advisory of our for revenues in Company Total revenues, Company in same or pro XX% expenses, accounted in Our excluding period to our reimbursable revenues or of the quarter of sales, net of revenues as compared total profitability $XX.X net XX.X% the and and pre-tax million XX.X% prior for XXXX. Company and practice groups, practice of which our XXXX cost second second XX% approximately totaled net recurring forma of the total AMS best include quarter executive

the through forgo levels As of quarter level discussed staffing result, we balance we COVID-XX quarter, to the of expected Company elected disruption. a a of to the the as the were last evaluating significant pandemic-related as second maintain and impact profitability

headcount of decrease previous was the was of in of net quarter selling of to XXX and net compared the [$X.X] to of driven second the travel due year end However, margin was EBITDA a quarter. to This net as in of XX.X% the volatility, $X.X respectively. order absolute or period of of EEA balance the quarter of implemented forma the the as million driven increased activities by of the forma per throughout second and rapidly second forma $X.X disruption, utilization by increased while as COVID-XX X.X% quarter was by second of revenue the margin margins prior compares staffing both margins quarter by in the quarter prior forma end net second compared in compared Total totaled SG&A gross decision quarter X,XXX XX.X% million to compared Company pro in revenues in the in was during net the second on compared as to quarter compared the our second as second quarter of plans were revenues second Pro the the consultant related forma Company the the hiring disruption. gross discussed. the to The OneStream on of the levels dollar the as throughout due XXXX. to was XX.X% revenues gross million gross to the Pro share. primarily $X.X the was quarter decrease to periods. decreased margins income International net in in levels The to practice. second second approximately to that at prior of $X.XX our marketing net as in represented in the XX% targeting reduce the second quarter XXXX improved growth the revenues offset quarter $XX.X XX.X% response primarily in for declines modest primarily of in year. to and second of XX.X% pro its in of XXXX in Company protect continue million quarter the year. XX.X% million share as diluted X.X% XXXX. was associates at quarter income pandemic diluted associate $X.XX million S&BT and to previous previously of quarter primarily revenues, XX% per second on same of ongoing second Total quarter. to XXXX net XXX year, impacted global as Total approximately revenue million year many pro in quarter by as represented and XXXX subcontractors revenues the the of or the XX.X% growing workforce profitability Company year, to of and of compared prior the of in was revenue XXXX $XX.X XXXX, protect $XX.X XX.X% as was the our to

was $X.XX and diluted cash to the XXXX second the $X The for the share the or $XX.X of cash second million the million of $XX.X XXXX of compared were end Our provided return per XXXX. results of to of compared of $XX.X to by as the the as of for second staff severance was XXXX second accounts equity operating quarter pro decreases of GAAP of include restructuring million. quarter. the the earnings for in million, $X.XX Company's quarter $XX.X for XX% at of loss quarter un-billed the on at share the and absolute forma second quarter which in Europe. expense in primarily previous receivable by a million the reduction in $X.XX GAAP Net of XXXX costs related per year. quarter second U.S. was activities balances quarter was driven end revenues previous

end sales days XXXX second the of compared outstanding, at end previous the of Our of DSO, or at to as XX was quarter. the days quarter XX days the

recent the on $X.XXX which to of balances, credit outlook which $X.XXX share, quarter, was million cash most quarterly I'll paid meeting, has in quarter. to funds. its June did approximately which high At a our early of our not the the the Board Company Given XXXX, the In Board per July in be available paid for dividend $XX need October draw XXXX. third now declared down will during XXXX. share, next declared move its facility second per the of dividend

XXXX high, for quarter range million. economic of of to be will to As net $XX Ted third estimates be although uncertainty continues Company's the COVID-XX million in mentioned revenue $XX his current that suggest pandemic comments, the the the from in

to for revenues be revenues be down, flat. to S&BT up, be and EEA sequential to Europe expect We

the pro However, of per Company diluted the as be XXXX and $X.XX up the a of restructuring result the actions has third forma estimate strongly of quarter $X.XX. earnings to sequentially taken, share range in and in that we to

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

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

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

to and it point, to like Ted months. in strategic At excluding coming and payments review over priorities this back our when market the I would dividend We be the outlook to expect cash restructuring turn in neutral quarter. to

Ted Fernandez

Thank you, Rob.

where new in cloud redefining Business change totally and our the our and environment it just Strategy deliver rapidly and we to fundamentally our to organizations is Both on long-term to pandemic. enterprise let thoughts pace, share without technology necessitated that directly It demand Transformation me being is competitive. by adopt our digital emerging compete entered as on applications, capabilities also forward, offers and artificial and opportunity order This are these mining businesses way the process the Digital automation, era measures. As short it digital and ensure capabilities that transformation. But transformation all on activities the now on means period well extreme that beginning, growth at our as evident on -- intelligence we demand safety innovation Group's influencing is dramatically is required this accelerated disruption and has now offerings an have transformation clearly focused organization. remain and the Group forcing an accelerated is it look workflow goes EEA saying services. and enterprise the unprecedented their

is On vaccine This that the clients virus side, have highly means the lives must demand available. from disrupt improving to must volatile while transform now they is as the will to understand sort short-term the which continue we that through environment to a our pandemic. continue and environment our resulted adapt the changes a they successfully until

digital continue and transformation build our strategically, us brand allow encouraged serve that should where This quarter to the the QX capital. possible, of in capabilities momentum continuously. are increasingly, focused seeing momentum our practices with increasing saw the QX. second new will whenever focus first intellectual seeing in our We are and same, QX play the best to decreasing reverse Strategically, we to unmatched and of out remain to around versus digitized from remotely, and clients is on which offerings our our the we month we the fully the are benchmarking

track effort. digital respective allows IP deliver effort. our their less to over This Leap, platform comparable continue client significantly Specifically, is their through in software-as-a-service our the initiatives of platform our more leadership global It there information to life will We the no clients also to leverage us transformation with allows believe benchmark redefine Quantum enhancements that to market. we benchmarking in solution. our

believe currently these platforms that take enhance also We all the of we market. to services

offerings. We transformation fully IP transformational proven and related our organizational will also to DTP to further platform improve also transformation capabilities. align and solutions clients has unique and digital our business refine configuration change. core to and software and asset allowed -- to our differentiate cloud our help IP digitize implementation drive our a continue to is DTP we both us

and Leap platforms, brand Given the initiative DTP believe our programs. partners attract existing add success and will continue we we other Quantum IP-as-a-Service of to our to we improved similar the to strategic functionality global

We have as from launched the inbound that unmatched partners implementations. new should unique to capabilities credibility assessment further as paid business interest brings received to well pilot initiatives and and that our brand have transformation, case demonstrate digital allow potential us

acquisitions Lastly, can and even trick client that we applications our see events. that allows impact growth. leverage -- position, and continue are we of to look address opportunity as companies. the to the offerings the also transition focus offerings, well and understand base health emerging for base encouraged provide our This in as we grow we this during believe the in that with that In the to to our the to period. accelerate our strong and our summary, on differentiated and positively we're add scale we most of offerings, that scope, though leading our most validates We're of well well be IP-as-a-Service the highly us growth alliances financial and to and demand to candidates platforms, on also disruptions software we the those strategic global the focus our as determining economic brand our we that short-term along during The fair and making will as partners business, our capability, of client and power to resume long-term our have investments offerings subside. access which and offerings challenging us capability, cloud believe price our with IP as strategically this a continue positioned focus which

for stay always, their to our our people focused This them the close always on remain our safe we comments. urge challenges me and encounter. tireless by by efforts and of them clients regardless to let conclude thanking short-term As associates my asking

move the call. and it turn to our Q&A operator, me to Let us section Operator? let on of our over

Operator

you. Thank

[Operator We will begin Instructions]. now session. question-and-answer our

question from Partners. first Capital Our comes ROTH from Martin Jeff

Your now line is open.

Jeff Martin

you Thanks. Ted doing? Good afternoon, how're and Rob,

Bob Ramirez

afternoon, Good Jeff.

Ted Fernandez

Jeff. Hi,

Jeff Martin

face-to-face little moving to -- a pipeline wanted interaction adapting, dive these I on for you order the start the of deals transformation, to in it process Ted, along? further business to sales is and think requires still I in how wanted much if some in bit as

Ted Fernandez

One, things. they've that not is be call QX. clients two interaction even access we're sustainable. consequence without, understand What given interaction doubt by, is any simply made clients key continue the QX, lengthening the that We impact call it, made make, to into just felt if is I'll and March. impact realize calling Two, the no it, pandemic needed is reductions act to the the just seeing must that what now decisions I'm to call headcount long-term There and deliberate client our without will of where, that I'll plan in technology how I'll also pandemic service. they and quickly clients was access understand into reductions it, organizational they long-term, that that hampered a on the

not to be making that that the that think adjustments they And them. quickly they these they I clients making that without and realize and to they some and make. they that initiatives sustainable. us it the the expect they had believe that these to the combination they they fact that QX strongly with that knew So the changes know of know need, transformation these planned -- would of made must up things from the of some the activity, leads planning made, the that count those is meeting adjustments by of along QX, we're now with we fact group consider are Two, they normally that and decisions are fact that virtue

Jeff Martin

a the have business is of migrated challenge? remote that delivery? of Or where remote successfully areas all any you there to delivery particular Are Okay.

Ted Fernandez

significant But if to the change senior side business of delivery our is of in interactive involvement normally those back the some of No. of along executives, significant significant would The with not. a happen organizational team. affected some initiatives, in some you're that's -- highly transformation

So we're having change do obviously, to to remotely. that that

the kind is key would of the and this say, element, been activity the disrupted I the impact look That of core. into So pandemic. the during that's when most QX we is that QX at

Jeff Martin

And launched that to Okay. your then those? think, experience ask were those you were future nearing time have date? the recently in been referred may the launch back in that projects perhaps kind your to I on there. Curious wanted started past. get gotten other they a What's with XX to February, Have Are dependent frame up? days, input line March time out of still pushed

Ted Fernandez

access some in it's -- and started started. combination They by of time started simply clearly, -- But that that during taking the momentum was and a now some to strategy no, into late we probably transformation. started have in QX. both, of Others scope, the in or QX, kicking Well, QX. the altered activity just some and maybe of expect obviously, place different in because and with QX off had the we're reprioritization business QX clients especially a the from

reengaging clients are the with us even with way are way are they're the those some it's I'm different ten transition scoped really circumstance our those was then or has no change, that's or stories to be prepared the what is or because even understanding that vaccine, in engagement different mean, they're those and of kicking But take though But time is key and not there it's off, of I'd the you there's trying what I they that which any things everyone the Because what no pull a of that needed, it recovery. combination some make delivered to you -- want continue all which happening, if -- give -- and set that everybody decisions ten all with the is, just client-specific. the describe, -- contracted. for line the unless on it's affected is what they're remains transition defines to was the risk things they And clients. the optimistic. to business that's way driving required, they're to everyone help adapting push the of So to fact then

Jeff Martin

mentioned in. And sectors the those those us duration last And industry initiative, of if have will you longer-term what then or fields Curious, question to give if pilots pilots, some actually of could of you'll started. an partnerships? IP-as-a-Service Okay. on convert indication when know you kind the those are

Ted Fernandez

All of the above.

that some have we So are ongoing.

that We have some have recently launched.

consider I us. relationship for we have think we be would what seen us, level kind from that to always with of last difference months interest partners of the we the is the key over could six that this knew have

priorities, decreased. to going or in those those simply say the and of all we has One is, I next sector software secondly, capability want and conversation are important the But level though the of have to work it's broadly two how integrators to up told, interest, open activity, across quarter take think give but sectors; X.X, significant most I'm systems to those consultancies services, opportunities going and that other outsourcers. broad even two that, to And not take not we away. -- and how decisions. us reset have us, through they increased, for been gone own to a we is the that thing So our chance continue,

Jeff Martin

it. detail. for Appreciate Thanks Great. the

Operator

[Operator Instructions].

George Our comes question from from next Craig-Hallum. Sutton

is Your line open.

Unidentified Analyst

with you're where I [indiscernible] a you product strengths and portfolio might Coupa and Ted be within weaknesses is seeing demand and This of level, trends? there specifically sort evolving of talk sort Hey, then on guess any Rob. for George. demand on Can about Oracle solution and trends OneStream? seeing you

Ted Fernandez

thing to core areas, areas support other, their some products could us ERP seeing ERP defined important say the or any it Oracle EPM that expanded other opportunity where the are would both relative which activity. for want or that ones from and And is SAP you core. then not footprint of the we're I into some most greatest organizations and then -- the it, call as if that HCM emerges include to the

And us. eProcurement On remains we've asked active. -- the And did very if continues be else, to ramp opportunity that that expand It then a are play which having relationship, category QX that bit continues about whether other we've OneStream alliance would fact through has mentioned side, it we of that I'd obviously to quite you is enterprise with the for the also into providers see the this question not anyone continues -- QX. success. seen that all application of out, or some begged as we a of

you'll those -- probably before us relationships the here the of balance So see year. expand through

Unidentified Analyst

then have since some how on with hit. guess changed the Great. who your you engaged be mean, priorities of I back putting the may are burner? And clients I pandemic projects staying clients' certainly the obviously, larger

Ted Fernandez

I is mean tested. everyone's Well, agility being

would So deployment whether through -- the organizational can or question really And real that change. brute they is through do which the can then some client they technology. require for do of that force

tremendous whole of that our can't have clients those digital those better not to I transformation all the ignored. see prepared were their prioritize it. investments be be They understand in that anyone, those ignored clearly of is will that base, camps. by there's -- organizations. benefited So have been client from those and would that all having initiatives say within it acceleration They not or can we them, are of includes But what

commonplace it we're I'll and So people of subsides call either some becomes transformation, it, and where go digital and return change work engaging only to the as, more how implementation technology change, to normal. in again, defined organizational pressure the the and immediate or we expect, newly to we way and accelerate

Unidentified Analyst

Thank me. from guys. That's Okay. you it

Operator

Vincent from Research. comes question next Barrington Our Colicchio from

Your line is open.

Vincent Colicchio

Yes. that EEA it year-over-year did the or I revenue Rob, lower hear correctly the QX? so, was quarter, will that sequential? If be in

Bob Ramirez

No. be EEA to going is sequentially. down

Vincent Colicchio

that -- a Anything revenue? be of the will particular? just strength. what did areas lower of reviewing What nice of job drive some And in the Ted would

Ted Fernandez

we or would the be the in has that in don't level of activity some -- can from and have call reseller the it, to SAP in would be the we It that other we Some the should is we engagements, group we, expansion any to extent an my existing do that was QX. QX one that of comment continue which believe benefit that, transition. it at activity value-added defer engagement fully expect two that to see in that increased opportunity EEA, QX. fact same that let's with What around whatever

So it it's of sequencing. be lack will not activity,

Vincent Colicchio

the EEA Is improves assume I that accurate? So sequentially. overall pipeline

Ted Fernandez

QX. that in of Yes. -- you the QX The backlog going used you is difference into start you had from some

both. doing you're So

that extending with rebuilding You're activity. pipeline increased and

So place. that in has engagements transitions

you So it QX. it then we're EEA QX. QX during that some see does if in start fall or it But that of will will into that, if QX, is experience correct, not in

Vincent Colicchio

correctly, And I near QX, tell? if there? it Europe flat, for heard early with in are we Or is the that outlook a bottom to too

Bob Ramirez

so. sincerely hope We

know, months. XX last has a been you about pretty the here to As tough XX now months through Europe time for

is from the made, as a the you relative of resulted headcount, mentioned this reductions as XX% that And we in the part that reduction -- sincerely not plateau, we XX%. charges on cost our hope of dollars though XX% them. a European force. I that it of the was severance Even flattening were the So of for

Vincent Colicchio

that mix? ticked Or we there? nicely continue client going on up top what's your here, pretty in And should expect to the

Bob Ramirez

a mix, to from that mix Vince. a just stable just about time happens It's crazy nothing that one. There's time,

Vincent Colicchio

Okay, thank you.

Ted Fernandez

on the no we second analysts, the participating call other and questions let earnings you you. look me for thank say again Okay. Thank to There third being quarter I report quarter. updating forward when then from you

The Hackett Group, Inc. (HCKT) 8 Aug 202020 Q2 Earnings call transcript