HCKT - Earnings call transcript Q1 2021

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Operator

Welcome to the Hackett Group First Quarter Earnings Conference Call. [Operator Instructions] The conference is being recorded. Hosting tonight’s call are Mr. Ted Fernandez, Chairman and CEO; Mr. Rob Ramirez, Chief Financial Officer. Mr. begin. may you Ramirez, you. Thank

Rob Ramirez

everyone discuss and joining afternoon, you thank Hackett Group’s to the us first Good for quarter results.

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

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

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

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

Ted Fernandez

welcome, everyone. and Rob, you, Thank

then will for open cash to Rob comments and I will for his will then up comment also normally do, quarterly call results, it Q&A. comments, market comments strategic-related me outlook. then As with flow The return on and some to we we overview and on operating start ask provide

call. welcoming our by start everyone earnings to again me quarter first Let

client all the individuals circumstances continue recognizing support work are Correspondingly, up difficult pandemic. to second pro net we we organizations to and XX% engagement who to clients through around dedicated is globe. need that competitive. to services earnings our transformation like those remote remain this since reported embrace It the of the important, revenues circumstances increasingly associates Consistent to the from that are million afternoon, equally up clearly a improving, adapted quickly comments I and digital of share under increased to and demand us with Also, year. $XX.X continue XX.X% and experience the of during evident very this quarter, successfully acknowledge and our requirement of to Although $X.XX, continue nonstop to for quarter. our acknowledge delivery sequentially prior the want would to requirements I and end per as the forma

and X% revenues the net Group, the the Although technologies Strategy practices. This in pandemic X% The second bounce resulted OneStream Transformation SAP by now accelerated Oracle into and pre-pandemic experiencing transformation, Group. emerging was primarily which mostly the our of deployment itself in has as and down growth is by a the were well these of we a the ERP continued with expected support has practice. growth they have sequentially, recovery EEA been and as our growth in prior sequential the revenue Business continue flat our led strong year, which to comparing back was which cloud-enabled quarter. digital our U.S. In was driven to quarter. practices to of were up sequential X% was up year-over-year basis, demand consistent growth on

in the quarter EPM are in and the increasing by the quarter. encouraged business. now Oracle we noticeable special in the Of second expected further second sequential activity also seeing are the into Europe improvement is in We U.S. the note our improvement

have made we us, have over to in investments growth group now all you RFP-as-a-service our be revenue implementations. know, behind years IP state known of platforms, our years and of from digitize transition that transitioned should cloud Quantum Transformation improving development global come. Platform, to Leap, that Hackett for on-premise of platform has our the offerings on-premise our include group of adversely The fully impacted going year-over-year many to our drivers our continue we forward. our and which which art last many result benchmarking highly are is this We as proprietary As Digital cloud several believe the of to DTP, as growth growth and better the to differentiating important

continue Additionally, part our are a also of and our automation future cloud partnerships in important transformation workflow providers growing other well. digital drivers and key growth and of be EPM, to as e-procurement, rapidly strategy,

to strong the to generate allowed ability flow sheet us balance stock. side, has operations and from increase buyback cash our our dividend On

– disruption of strong start debt invest continuing following our that the comments. strategy to properly that details Rob? cash to our having available that we comments no that additional at and results, cash have comment operating was provided flow on Rob’s demand with said, fully to a acquisitions strong the let and on with while market We With us in provide me to It outlook. make facility on faced. manage will and fund last ability I a conditions we cash balances also credit is ask the important it reiterate identify, to position year it’s outstanding business. Rob

Rob Ramirez

Thank you, Ted.

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

of S&BT, will and our I our separately regarding the EEA, Business Group, call, Strategy EPM results or and this financial of comment total Group, purposes Analytics international company. ERP, For the or group and Transformation our

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

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

and includes the S&BT that our group our Europe. based Our are EEA resources of results in primarily international

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

amount Given the to assess net revenues pandemic, and trends. we investors on business travel focus to of encourage revenue due growth the to limited

During today, useful press measures our earlier call our of non-GAAP we believe to financial included We provides certain information reconciliations non-GAAP will which measures, filed in we release today. reference investors. GAAP to financial

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

an throughout to decrease when the when the of to The prior to was year, X% to prior net mentioned, remote compared a QX engagement As to continued a revenues increase million end and XXXX service was the Ted compared which the our X% reimbursable the expenses ratio high which to sequential of delivery in we a X.X% revenue in increase see Reimbursable in year. required which resulted guidance above client have expense revenues COVID-XX, quarter, significantly model. transition as range. compared reduced been to X.X% net due $XX.X on

for Oracle which our S&BT year-over-year the Net sequential to from of flat was $X.X OneStream, prior basis for first a X% U.S. Oracle revenues a increase international revenues of were demand quarter, sequential $XX.X basis. year. finished Solutions the net SAP in year-over-year driven a of for operations, year, is practice quarter. by and Net for represented EPM and increase enterprise group essentially to our on basis million, and in group increase first initiatives. XXXX up an group growth that and to prior quarter is started were an compared on of The a our second on company to experience compared increase as decrease basis, our flat we the decrease practices. were XX% million, sequentially of has total It when on of EEA basis noting improving a and the of up sequential as be of ERP revenues when an a were on the Our same expected in XX% transformation expected. X% a revenues quarter our X% reflecting the and million, the sequential $XX.X a period in increase demand worth Net XX%, X% sequential the first

worth company a is in revenues X% as net quarter the international on and Total compared However, is quarter net company noting the to XX% to XX% total slightly the quarter. in for of basis up of international it be sequential that accounted prior revenues second the first year. expected in prior

the in of margins to disruption from year excluding as forma basis XX.X% revenues sequential margin count or year. was sales at to from XXX as The XXXX. is in XXX sales, up the $XX.X million improved gross workforce of of essentially to The driven quarter prior and the margin was in expenses net down quarter XX% and or revenues advisory, a the on sequential of pro our to XX.X%, revenues $XX of pandemic. diluted of quarter the first of revenues dollar to in as net XX.X%. down primarily end reduce year. and quarter Our forma the in to $XX.X net to on global cost the million guidance sequentially up XX.X% and taken net $XX.X to year. sales forma above per the ongoing quarter. $XX.X range. share virtual by our year-over-year primarily approximately recurring or response earnings the prior XX.X%, SG&A XX.X%, sequential compared gross compares end actions first decrease net due of for executive XX.X%, The which totaled and of $XX.X sequential $XX.X pro the of previous increase International quarter. on XX.X% net delivery million, which forma as was the a The and revenues, $XX.X revenues, year million due total $X.X second quarter revenues reimbursable in revenues of the XX.X% the of pandemic. in XX.X% first operating gross net $X.X the forma gross million payable, as income previous in in The the the of count in primarily accounts compared activities from or $X.XX was company The of pro the XXXX sequential prior income $X.XX of the of or and in diluted prior per Total quarter diluted due provided compared required compared million $X.X the to consultant net was Net of adjusted company’s our non-cash end for of our S&BT or at first to XXXX. per in cash revenues is models quarter decrease quarter the payable. $X.X a for forma travel-related discussed. prior margins Pro net net flat in million revenues EBITDA company XX% quarter was Total decreased was primarily million margins offset share increase of Total of at in and revenues of the decrease net sequentially end the in represents to XX.X% of margin partially driven revenues of the earnings an up of first activities down first $XX.X first and to as of to million XX.X%. from of or head the head XX.X% was decline sequentially revenues year year. decrease the total the previously move net in sequential increases and to quarter at XX.X% accounted as million, prior pro software per IP-as-a-service was Pro or in approximately end XX%, the by and to $X.XX in revenues, decreases year quarter. or year-over-year net is million by income XX%. by X,XXX income of and or as previous in net of revenues the first high of was to net first revenues quarter and and earnings in compared earnings was Cash totaled XXXX is first million, by XXXX million compared of XX.X% sequential practice net up XX.X% and diluted and as XXXX include $XX.X XX%, XX.X%. $XX.X previous compared company increase quarter quarter of result quarter as to company forma and balances accounts XXXX of company company of the the the $X.XX company of which million per XX% approximately compared taxes as by for share, the SAP items, from the absolute in our the million on compared pro the the Total in the prior were year net on marketing selling of AMS prior the was EEA revenue receivable cash compared to quarter groups due previous share share total XX.X% This XX% contribution primarily growth. decrease

was as XX XX days previous quarter unused year. company’s the at quarter. of remained sales day in first $XX previous the quarter end XX the or million at and DSO, days the of the days the the end to during of facility compared credit quarter Our The outstanding, first

total we of the XXX,XXX income to During purchases the approximately average tax including quarter, $X.X triggered shares at per restricted of from a stock cost by satisfy for withholding the shares. of employees an vesting company of $XX.XX share million, repurchased

million Our the an the increase at purchase the the most end cost company’s shares Board an the end company’s authorized of million. stock we share Directors $XX total After share stock $X of recent the of was quarter the $X.X a remaining of per million. a meeting, quarter, authorization. average At $XX.XX in for additional of repurchased authorization of XXX,XXX at its repurchase company’s

June Additionally, paid be move per now. guidance July dividend XXXX, on the Board of share of quarterly declared the XXXX. to second I $X.XX on XX, record for X, to shareholders will

revenue the of $XX.X the estimates in pandemic quarter current Ted million second suggest comments, to for XXXX million. range $XX.X in the company’s uncertainty his net will economic be from of As mentioned although continues, that the

earnings and We and of to expect estimate $X.XX $X.XX. and sequentially, S&BT diluted strongly. for up share to the the up, in of per to sequential up We EEA to be International revenues in quarter XXXX forma be second be range pro

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

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

XX% to up of be balances, excluding on XX%. basis. in turn expect revenues the it And We quarter pro months. be expect second to forma our coming over range of net approximately outlook market a activity for we the EBITDA on buyback cash point, and At to sequential strategic impact to I share to review to Ted the this would like priorities

Ted Fernandez

Thank Rob. you,

environment look thoughts long-term we me it let and and opportunity offers forward, the our the our organization. on As share demand short growth

unlike increased This is always the ability automation, means transformation home has client competition mining also and serve process Although disruption, if This QX, digital engagement that awareness created to cloud workflow now our clearly a initiatives. never to believe applications, the and during very experience issue forcing our pandemic these influencing demand most since infrastructure, businesses said, analytics we’ve also increased experienced time. be continues for evident it all their heightened order it that demand that continued accelerated Consistent remain for in accelerated change innovation unprecedented way also our an the fundamentally organizations our been and will new in demand the industry travel compete, of we improved quarter, digital – is are attract transformation with first to has in resources end and resulting activities the services. we challenging and dramatically created work pace, long enterprise demand client services. artificial With and to seen related is of then retain our required demand from amount at and – Digital capabilities clients. redefining the that of deliver of comments to and our organization competitive. adopt intelligence to the since talent to ability

should second well has to long-term us increasing continues levels of XXXX, Specifically, XXXX. allow year pre-pandemic the continued it should position profitability. if This return since for of momentum growth the into to last quarter us end the and of it

demand, to potential Quantum our that desire Leap to continue selling partners improved their leverage development we interest see to platforms case business IP our transformation an from addition digital to permission efforts. In and transformation increased and value digital license bolster to brand and

to former half with have continue pilots We of XX and have of opportunities. than these or opportunities near-term launching proposals, with contract more over are are negotiations in several them

benefit our focused we brand and not best they which to are opportunities us to benchmarking remotely same, with our and and further build our transformation remain our This is allow new quarter, unmatched impact believe the and Strategically, should the will fully digitized expected our continue XXXX increasingly offerings possible, new serve these on intellectual should capabilities capital. Although continuously. practices results. to IP, digital focus current around strategically, our to whenever clients

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

well We differentiate organizational and to offerings. Platforms, allowed software IP as asset and Transformation drive or IP-as-a-service, digitize core to DTP cloud clients a solution further to IP, change. will transformational as continue our is DTP Digital capabilities. help enhance DTP, and implementation us unique digital proven solutions to our align related our applications to design transformation fully configuration our

demo can website, that page become of on platforms. As the with added our to capabilities have of call, more so Investor our we investors last familiar Relations I a XX-minute mentioned our our

though have business, or believe strategically our even accelerate grow that to leverage and IP, Lastly, scale the which acquisitions for alliances and we we client continue base capability growth. we that our our or look to scope offerings add can

focus our the allowed allow challenging We are of the to that validates offerings, sound making. also brand and This our can most the the of see to to us events. address with – encouraged focus and we position power are positively us investments our economic along the financial

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

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

Operator

come Thank will you. question George [Operator Sutton Instructions] Our with Craig-Hallum. from first

now Your line is open.

George Sutton

Thank on the you for could side cloud and of – I you of results. Oracle if premise business. congratulations versus a nice the us wondered on breakdown the give the

Ted Fernandez

We have two dimensions, George.

little revenues, we of organization. first, cloud-related The less a XX% maybe AMS-related entire half is our represents pipeline side, approximately implementations. on than than remaining – portion revenues for the have a bit revenues So the application-managed the this implementation applications. XX% bit the implementation services and on-prem revenues. The revenues is more point, it That on-prem-related XX% little are is of large that god, over the of at actually of

well. side, SAP it’s it’s the XX% plus on On fully cloud. the And side, probably OneStream as

George Sutton

travel. your better substantially I mentioned not people you a address, required bifurcated message on I relative – talent side wanted kind for if to demand to is think, to of are

to a your rate address just we would and restrictions pipeline. start remove bifurcation? have on Can that growth hand, you of the some COVID and positive up impact other the open On nice as that

Ted Fernandez

amount We’ve the the it remain our – some of back separate our people that the sell efficiencies that week. that our will a is that efficiently from, of actually and significant people, doubt that very not do, that from favorable deal percentage who delivery XX% days work for The large of to the deliver had lifestyle place a That and demands X retain place say, experienced of in think XX% to demonstrated the happen desire significant have years under There no two. go to amount we be would ability to for pre-COVID. people do in very can’t travel X come. let’s they with who now have of remotely XX% the to not traveling remote normally on our of that for to creates in work terms we to of relative them currently that both attract us, but that people can will impact would when COVID. will we where home. many to we mix they is out both our people Well, Well, happen a ability would a – have love and reduced to

embrace of future. we’re during us us So right – be obviously think will the near have and the sometime now, we’re XXXX. expecting it remaining clients expecting back We in to part slow here

sales to side, contacts the we or return we back and on So those would go activity. and bifurcate would say that in-person-related more to expect on-site

now versus large, On multiple of large believe deal that continue day It a single of – remotely. we the not really relative to our work is our only going on great be to but clients creates people delivery as senior effectively being they translated would ability done week, the spending you end efficiencies, places They a some three with sometimes lifestyle, to is our of having people delivery. George, majority to side, lot time in which ineffective client-related fully pursuits of and time. to of bit and traveling be client-related a of to would different up imagine a can some quite two were given or a

great think great think us. for the it’s we for client. We it’s So

We mix where will out. see the plays

George Sutton

typos in had Europe? referred script, And improvement it. and both lastly, your think I to that you Got in then you Rob

Ted Fernandez

We...

George Sutton

we’ve I the in same Europe sentence word many years. in heard the improvement think don’t in

Ted Fernandez

at – at look exact look go let words. back will it his Rob We and

Rob Ramirez

No, No. no.

we for worth slightly basis. is be So net revenues it X%, on but did noting international a expected say up is sequential International decrease $X.X said what the group to we was that was a million,

George Sutton

That and correct. fabulous. the was term, that’s sequential, Up

Ted Fernandez

year-over-year down around basis, significantly. chance a a that, are We us on we noting. thought But was into George, were think second clearly, start has still results we XX%. actually improving that They quarter. wanted to and the hurting note Europe worth The to turn

George Sutton

No, was guys. Thanks Yes. to hear. that nice

Operator

Our come with Martin will [Operator question Jeff ROTH Instructions] Capital next from Partners.

line is Your now open.

Jeff Martin

Rob. Thank are you How doing? you. and Ted Hi,

Ted Fernandez

Jeff. Hi,

Rob Ramirez

Hi, Jeff.

Jeff Martin

wanted is So there? year? sense, forward Can to to the a improved good EPM balance improving You for you a you also specifically for get it’s Ted, going see what implications And tailwind, balance thing in hear. mentioned are of but carrying demand year? anything the QX, driving the of point the to be the a that

Ted Fernandez

Several for is applications things. it One, EPM. is clearly extending sheer enterprise demand cloud strong, and into

are we to increase believe on its attention call part started we of initiatives, they multi-tier opportunities. ERP deal, opportunity EPM-related which single Secondly, has an or whether Oracle

has sheer been and demand helpful. the on Oracle demand. is resulting focus So the increased very in it set is vendor, that also an very, both application improved by But focus pretty strong

because experiencing to we cap continue know, wanted the that it work without Coast on. come which and East ERP to that gapping we’re it would in capability the So is we – to would like reason at you this as say we – and we the

is Oracle to improvement that we was entire that the and note of make So in even resources seeing that’s East the ERP. Coast sure it that to The to improvement, EPM country. group throughout relative we Oracle without wanted clearly want make

So worth it was noting.

Jeff Martin

foresee Do the you end question. of East the year? having a group an my Coast That’s second Yes. ERP Oracle before yourself segue into good

Ted Fernandez

at hard working it. certainly We’re

It but we capability to is for capabilities improve continue will answer a look front. increase that continue the to we remains acquisitions So organically, the on and those priority.

Jeff Martin

for And business then through are the Okay. that there looking pieces you’re acquisitions? other to actively

Ted Fernandez

to group. at that the OneStream technologies. is love Look, also other answer looking to The we’d we’re add

an IP-related of as the Those through for side on eye, strength attract harder given continue had keep the you’ll hardest to to be be to us and the aggressive us will attract. enterprise the in seem S/XHANA much opportunities. balance But the we’ve see cloud year. identify, success to And our We the and well. ones

Jeff Martin

the you Okay. that at able And and are that talk is or early of too point, finally, how a then to you specific us on are to OneStream numbers practice, large fast growing give how sense practice is this to OneStream? still

Ted Fernandez

back growing becoming meaningful pace. quarter. answer The The no. and a is let to at is answer rather on group and that get a hold grow that very We’d It’s more little each continue larger. rapid

named a of been clearly Diamond now highest we’ve their seen, then you’ve not is very Partner, the We one which one, top partnership. number we level think think two. if I are of number partners,

close very We’re thereafter.

So for it’s an area us. of focus

success We’re with having tremendous it.

you’ll us rapidly. So to grow invest to and that see continue

Jeff Martin

exceeding you get quarter Okay, set XXXX. then I And also on back to the commend a want as of nice XXXX wonderful. really half you and and what we out for expectations into as

growth. to adjusted EPS nice So, the see year-over-year

Ted Fernandez

Yes.

QX, profitability in profitability provided in And even revenues will to year disruptive we we was opportunity We out that than as year’s with then into enjoying last when in at look see promising last us well. sequential QX – the no quarter of obviously, to that’s you, year’s, though last our promising. for below but above see us very guidance tell one’s more it now were us. Obviously, the slightly was meaningful second

Jeff Martin

Ted. you, Thank

Operator

Colicchio Research. Our from will Barrington next Vincent cost from come

Your line is now open.

Vincent Colicchio

disrupting – offshore delivery curious, the your any Yes. Ted, is that business and of I’m is in way concern? pandemic something if yet, or not

Ted Fernandezb

leader. We’ve incredible has it an a been great impacted. We’ve team, Yes. has. It got but got

very to trying very a leader, But group disruption again, that’s of for that been we’ve team. strong us strong some have So with a we’re growing a here experienced the recently. backfill had – they

But been to here challenging them strongly. time, entire – expect a we it’s So pull-through very we obviously, country. for the

Vincent Colicchio

didn’t said change for on sequential the I EEA what in hear QX? prepared you terms your business And of Rob, remarks, in

Rob Ramirez

We didn’t. be we QX, For to up that’s strongly. just said going

Vincent Colicchio

the there? Okay. flow better, there Or is call anything And of just business? for is to it the ebb and International changed out

Ted Fernandez

client what were will lockdown path U.S. in the the extended. disruption increasing. recovery we just have than we to engagement longer there in But and other call So experienced the activity in more think clearly UK than slower a and we it’s it, the but no,

that is they can And so our improve. – but continue we hope – to

they nice will would to that that’s not great slightly, it’s it be take turn That even going stabilizing to means starting up that us if around. are we think to it, be and things as but So us well. be for can it’s for

Vincent Colicchio

And that partnerships you speaking those business, to expect point your year? incrementally potential some for I this understand some of you – for start contributing IP-as-a-service at did about that

Ted Fernandez

don’t that be not those believe know of they second wanted will be I to the if half have second impact year. the contracts We of us the disappointed impacted XXXX. that is very many the in contribute But to they we guidance don’t half also if what should the could – of have for by people being

Vincent Colicchio

you are incremental you’ll revenue have saying relationships that your expectation? what already you’re contracted relationships? so that from So some Is some new is that see

Ted Fernandez

– XXXX. and is have that we’ve what have comments are stage should of we half finalizing so I’ve with are in of been the in of we second negotiating hope several combination also several we We that parties, contract – what different combination of we launches. the finalizing think, several we have our and the said contracting pilots pilot will And help be negotiation

Vincent Colicchio

your of pricing? in there the any businesses in any competitive has And environment been change in terms of then

Ted Fernandez

and the resourcing through getting you, No. attention has resourcing. I tell But can great gone

start what will is when kind of that pricing you it only improve So means this experiencing demand.

Vincent Colicchio

Ted. Nice quarter, Okay.

Ted Fernandez

Vince. Thank you,

making Just sure set? are we all

Operator

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

Ted Fernandez

operator. you, Thank

in Thank first our we call. once quarter. second you. thank look updating quarter earnings forward you again again for me participating the report We everyone to Let

Operator

for This on Please your will day. have conclude today’s great you Thank participation you. a today’s conference. Thank call.

The Hackett Group, Inc. (HCKT) 12 May 212021 Q1 Earnings call transcript