HCKT - Earnings call transcript Q1 2022

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Operator

Welcome to the Hackett Group First 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

Rob Ramirez

Good discuss The everyone and results. thank to us joining for Hackett you afternoon Group's quarter first

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

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

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

Ted Fernandez

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

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

embrace afternoon, services with up our XX.X%, quarter will our reimbursements of our momentum driven which, adjusted strategy-related strong the into a Business Strategy Business OneStream to market we Consistent Q&A. we the will We demand million our practices. up after through for the experienced open continued year, first of to the U.S. of significantly it up last related and review and comments, the is results we then revenues and share a to $X.XX, earnings our change by groups rate reported million guidance Group digital remain and performance quarterly expectations. and revenues unprecedented. requirement Organizations the above of competitive and and strong Transformation need outperformance across and exceeded this its all were nearly innovation year-over-year Results and transformation Correspondingly, XXXX. performance Group and both recognize revenues Oracle Transformation on as $XX.X digital margins. total with before gross continued increased Strategy trend and of of $XX.X basis. per of

consulting our and our Transformation grew higher margin Additionally, rate than Business at favorably higher margins. Strategy impacting advisory a research offerings offerings,

ERP group Analytics as EEA growth momentum this performance and our in after driven SAP its or its Oracle Our growth is XXXX. strong OneStream group, was and EPM by rebuilding group strong

large US We group, results saw from benefited European also cross-Atlantic our engagements. which from better-than-expected

favorably of to guidance. perform In sequential as IP-as-a-Service will advisory large virtual our us the with and transformation allow from EEA targets. along into increased the research summary, and sales delivery overall performance. end profitability are IP-based of higher-margin engagements well as leverage Some QX and efficiencies and increasing unfavorably long-term offerings This should growth of our and overperformance that strategy model continue our impacting benchmarking our momentum not at business the impacting higher

develop platform Hackett all IP made fully to of Leap have are all digital These growing across transformation Digital proprietary and cloud differentiate allowing We state-of-the-art automation are technology and our strategy long-term the mining important that our our noting new these Additionally, potential our rapidly in us any and that achieved and future drivers Quantum of development important profitability process providers are digitize Transformation and us strategy the It we workflow targets. of to or to of relationships believe our enterprise. without as growth which platforms, growth are expand of our are is to offerings and that believe IPaaS benchmarking components DTP should well. digital and we and relationships investments were highly areas reported our key include global new Platform our our allowing results. worth benefit results our additional platforms relationships

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

expand back let buy business. also on said strategy me acquisitions We provide to Rob? to results, our to also our comment cash Rob comments. facility and fund stock I to comments while invest continuing With following that on ask market or current flow, Rob's additional plan our details conditions outlook. we operating will make identify on in and

Rob Ramirez

you, Thank Ted.

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

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

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

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

primarily passed that be and associated reimbursements in that revenues we before have Group through primarily project our will travel-related International resources are of expenses our profitability. note impact are discussion. Reimbursable our Our expenses clients our referencing our includes the Please and S&BT based to in Europe. to results no EEA

release post this based call in provide the the earlier company's today, During to information reconciliations financial also press filed investors. discussion believe page call and reference included GAAP we Investor from our the measures, financial will to non-GAAP of Relations which non-GAAP our on of reconciliations we'll website. to We today, certain useful measures additional

$XX.X mentioned, to quarter For up first XXXX, when the the million, XX% were prior of as compared revenues year. total Ted

reimbursements Our to XX% high to range the million, $XX.X of continue strong above compared for year, our revenue prior as revenues end is we demand which up throughout quarter. see guidance the increased our when to the services before

XXXX quarter total first revenues reimbursable ratio X.X% X.X% to on compared The expense in prior as year. the was

significantly and due reimbursable stated delivery sales the expenses transition remote As to been previously, reduced service model. have to

same share up Adjusted revenues increased incentive first diluted XX% count was of margin of groups. subcontractors the as subcontractors, GAAP a gross revenues Total XX%. revenues our XXXX, adjusted and was activities total total adjusted compensation primarily increased XXXX, the The to and as in expenses of which associated year. an the and EEA Our increase the is in million, for and operating adjusted of net were partially Adjusted when our XX% revenues, XX $XX.X with is previous consultant million of in offset compared $XX.X EPM income Approximately, from compared non-cash for $X.X million reimbursements, the resulting which per revenues improving million head period account of was to million, common which performance SAP continued as diluted of of before first revenues quarter before XXXX of cost Group the resulting from prior reimbursement of million to as high increased million of an include the and by up result EBITDA engagements per Adjusted year XX% before of common before improving The revenues set before were or $XX.X prior subscription-based compared includes income increase the to reimbursements end cash reimbursements income the Company multiyear compared of of the year. in year. of XX% large Research the common provided primarily company margin exclude growth of and year, the reimbursements earnings for quarter per XX% dollar company growth accrued performance. adjusted first results. XX.X% increase revenues before XX% in represents or of a which margins. XXXX. XX% the our year-over-year bonuses. research first net growth. in period the income $XX.X reimbursements a our $XX.X This Group Service, was of for the a an year-over-year company million was $XX and year-over-year the year. non-cash continued headcount quarter when XX.X% same due Solutions million partially growth of as due Institute compensation of quarter share first to revenues compared margin the compensation previous engagements total compares first net Total second on year. on IP consultant year-end contract the basis, stock above consist of net which Revenues in of first million revenues prior by income company use ERP for Revenues by and increase the adjusted quarter absolute share was GAAP adjusted the activity, prior since first total to or or strong XX% the totaled $X.XX, the primarily revenues global SG&A share the increase of reimbursements S&BT year-over-year due at in reimbursements of of first to for practice, commensurate of XX.X% sales. year. with expenses Revenues the when to revenues the accruals, year-over-year XX% and $XX.X offerings. quarter The by advisory $XX.X million as compared the common same the company guidance as XX% in end $X.XX the as recurring primarily million, total The $XX.X of US-driven income previous company or prior reimbursable the driven of Group compared were and first -- revenue reimbursements balances per to before decreases end our compared XXXX, our to revenues period primarily advisory revenues the for OneStream which XX% and at in of XXXX to our $X.X million of $X.X is $X.XX, compared of first range. by US quarter primarily in the company's to due in quarter, prior year, were X% increasing expense, million, to Company XXX to net Net of sales prior the international quarter the International of cash first quarter or of year-over-year of $X.XX the Hackett XXXX operations the at were quarter, represented the year, increase or sequential prior demand. reimbursements our end from partially our X,XXX quarter diluted compared engagements. diluted headcount primarily X,XXX quarter large of increases incremental income payment increased liabilities before strong in were utilization in reflecting $XX.X in benchmarks or increase offset in at before transition to of net before higher of with AMS offset driven the quarter. XX% was $XX.X in quarter prior higher the of to The end implementation activities increase due the net compared quarter, Oracle of from XX% and to were the by of totaled

of of remained during days the was previous facility quarter the to days unused or company's the of quarter. XX at days The the the as credit million end sales end $XX outstanding first XX XXXX. DSO Our at quarter compared

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

X, its to XXXX. At of Our the authorization XXXX of for per July repurchase record on stock at most million. the quarter Directors end as of the XX, second dividend be paid the remaining quarterly declared $XX.X of company's meeting recent $X.XX June shareholders was Board of share

move the to prior for nonrecurring a sales quarter of of like I included in year company million $X.X Before software to guidance everyone second the I XXXX, results the would remind quarter second transaction. that

call, sales During quarter to results with be reimbursements revenue in our total the XXXX transaction. for range to without these before highlighted the million quarter company second second The impact the and of we million. estimates of $XX this software of $XX XXXX

be of up in be QX be second year, the to decrease second software and expect X% basis, of $X.XX. sequential Excluding increases transition impact represents quarter. the three up a international year-over-year the $X.XX net to of per sale to we to of we estimate SAP engagements. diluted in share will the quarter revenues The to of and International of S&BT We expect total adjusted prior in EEA XXXX down $X.XX the due a X% practice groups. On large the in transaction to range several be the sequential year-over-year across decrease approximately income all with

Excluding SAP to QX sale XX%. the transaction impact in of the increase this of represent prior of XX% an software would the year

gross before XX%. to expect adjusted be approximately margin XX% on reimbursements We to revenues

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

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

Ted Fernandez

you, Thank Rob.

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

new that cloud mining infrastructure, digital redefining transformation transformation change process demand automation, to an order and This influencing of unprecedented awareness and All disruption analytics, accelerated the is demand enterprise Digital created remain applications, competitive. deliver businesses forcing the capabilities also and heightened activities pandemic compete initiatives. for all adopt that way digital pace dramatically their it at accelerated services. these fundamentally means created to are workflow organizations in innovation

in We also remote result that challenges broader We emerging inflationary, improvement initiatives created by geopolitical fiscal, the we to our chain critical seen very increased may competition address face. from long The in should be attract economic concerns and may talent, service deceleration, help to resulting believe unlike of transformation associates realize be that our for digital model have global which will delivery may organizations experienced short-term we that increased for recruiting digital us demand a help also able the productivity time. transformation retention candidates. from that believe supply clients from or pool the a as to is be

include value partners delivery our bolster platforms historical brand will IP-as-a-Service and and continue for business our desire travel our with requirements this in IP offerings order path now believe in license our that across defined next us that our base to to their to sales We and because Longer done industry, to have IP throughout responsibility. a all client a to industry. struggled positive of and greater into perform retain increase which a This their sales We that retain which will demanding resources marketing efforts. talent our dedicated XXXX. very we're term, of have delivery successful In continue and and our XXXX. will development finally revenues on to all and to our our the to we will flexibility to This highly results attract engaged model selling and our area. our normal with we IP-led associates offerings increase case that provides invest of to clients permission development personal, a allow

have opportunities believe results. to We continue 'XX with should these programs pilot We and further opportunities formal many proposals, launching contract our negotiations. benefit

As second first our impacting I our will they said quarter. start impact did quarter. They

we market of help and intelligence We a of selected brand, the providers new offerings our or the recurring key capital and capabilities IP best performance this and revenue should us and think series our our and similar to technology practices will have we've a Strategically, across advisory offerings This unmatched and few capabilities opportunity great assess IP another existing vendor, unique we our allow focus intellectual category. continuously. and platforms. by transformation executive focused service expect also market digitized initiative fully believe to strategically, to our have and around our launch advisory platform benchmarking been to will encouraged highlight on programs to same, years. that serve of potential in our in clients has is digital remotely This and build remain research high-margin our next categories. which the we is that greater to intelligence brand and Obviously, leverage the continue new

IP enhancements Software-as-a-Service global our case our track accelerate well to We We software effort. These market. deliver allows our believe their are assessments, Digital redefine transformation as less Leap, benchmarking information respective allow initiatives also as platforms client leverage us solution our leadership compelling continue in with to with to effort. process and through flow also to comparable will additional platforms benchmarking over in the Quantum significantly create that digital the more life configuration us It no Transformation decisions to benefit platform. along the there of

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

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

stay by and our people our their efforts tireless we clients for no focused and conclude on let always our comments. them to performance what our by challenges me encounter. on congratulating matter associates urge them sort of and thanking highly always, my may Those close As

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

Operator

the [Operator Instructions] question is first queue from Hallum. in George with The Craig Sutton

Your line open. is now

George Sutton

QX I define characteristics talk seeing economic? Ted, expecting and know had great of of as recur QX. outside you. that looking you demand sort changes in you're the that in what first implementations would a the I from that don't pretty that you don't the for QX? you're you quarter Thank change about pure as finished you're Anything a good just Can

Ted Fernandez

on all. the at None, marketplace

group. deal you you a in And, saw when many our greater $X.XX, that But exceed to what that EEA we I'll to deploy people throughput this QX by biggest commented margin. of you'll results obviously, first But the we've would be great you reduction allow it long -- outside QX in transition, that will that the engagements yes, was just been as and that with outstanding time benefits practice it specifically, change mean, said As contribution migrating, large comment which as have with never from cases international longer. from doing that But is And customary, who I it yes, activity mean, no, all do you close expected I'll we I our some I will the -- that in It's call would that. across you also group. But be contribution the it as get Europe, cylinders, an emanates firing that first large engagements when to George. disrupts fluidity. quarter as come in to I quarter. other on comes

results color tried this would hear QX about trying know yes, provide of we and we awkward fact QX us. that into we've because call the different much little you from can made as it's moving than slightly what's as is to then the to we're talk So, a

George Sutton

at further looking Well, as the are supply challenges look you little there that out a have challenges. major you out chain

be we higher you're operational got what increasingly you've going rates. enter may the also I marks question recession. capital have a working think, to the challenges companies for given obvious as And

talk normalized see things you when those go recession? Can bode you you're yet, of if we your about to that All like that well if anything expect for typically would opportunities. seeing a into pretty or

Ted Fernandez

are people some of we're chain We of the for engagements as affecting haven't them engagement part taking but that where inflationary of any responding seeing reason seen on. supply or that to some the disruption, we are issues are the

our that in trying -- to mentioned the been moving that we more So of just improvement fact to remind and no, as competitive. to those to I part most well business the if we've challenges changes commentary of fact the business what your as efficient that core our automation aspect through I aggressively productivity on. wanted But call digitized are that across as responding in business I added the are improving to that's both every early addressed to that's focus and just of get to remain their also everyone be workflow reorganizing in concentrate

see short call in meaningful some truly -- the here near anything of I'll We don't disruption. So it to expect term.

George Sutton

You the I mentioned Formula cylinders, question Rob. guess, money firing sponsorship One QX? for Will all on be a in

Rob Ramirez

tomorrow. Unfortunately, not. go had to a clients. there, did but spend there with time chance chance we important George. I I sponsorship have those offer really to some no do we opportunities, no, some But a was

George Sutton

Super. Thanks, guys.

Operator

queue Barrington Next is the Instructions] question [Operator from Research. Vince Colicchio in with

Your open. line is

Vince Colicchio

you growth pipeline? it the give improving? expect And of -- you business? could you Is a SAP expect would to would the sense Ted, sequentially to when us SAP return

Ted Fernandez

we the It has been to improving got since year-end.

month-on-month. it seeing we're So

So would that expect in the quarter. third we

Vince Colicchio

your Did You share your you And are the talked on in about increase constraints market. to labor what the in effort U.S. offset this in second the prior help doing offshore for the calls half? on increasing of some to thoughts quarter?

Ted Fernandez

-- more hiring of than our to our are offshore. of continue hires be half Half that hiring

half of leverage effort than to to offshore, total across going in we technology We been practices. nearly are the far hiring our try groups. thus across, offshore has that practices. as say, all of The capability primarily I'm continue to happening With our all

in we resources. of We we offshore have or that and S&BT well. think as -- So take to work with there's do opportunity XX% of related the over leverage some are those an groups

through looking of So the year the balance opportunity at well. we'll as that keep

Vince Colicchio

that may you relationships future deals IP-as-a-Service, benefit commented I think had like? does new more you And some will I think, that you insinuated look to What have that close your you there? results. Are

Ted Fernandez

The yes. answer is,

So give little color. first let yes, with that bit you me start me but more answering a let

research you that which last a initial actually that into IPaaS as provider we in did If opportunity we it, deal fall That extended more recall, had their starts significant, QX. I commitment increase call large QX. has than

has to Gartner been research do uses fact, has call want I'll the that does we technology of launch for of incredibly could several just In it's programs be, to in work who it, we that the similar providers our of and that that that the complementary led highly I'll client, provider of year. software we'll on launch expect these from had so support what Hackett you was call our these complementary. programs can these been second it to vendors, to the initial But segment accelerated effort to intelligence all research what assess where think software for that service market commented and comes services advisory some sophisticated of we to and half success call with

a a and leave also IPaaS where is it the at mining we've then opportunity we'll launched just I'll lead opportunity, Additionally, broader but that, process which to that space. launching. it's in be we've could also an success related, pilot

to we launching clients opportunities of about. frameworks and that a as or was IPaaS try program to also $X.X amount launch to as basket say, quarter. for smaller know, of we're we'll of have just continue and one sign much available it working part that opportunity a potential pilot. an million opportunity tracking one think partners our an But clients well our a We're up tools with make those I optimistic smaller and we larger as this we be you giving

Vince Colicchio

-- remind you year? said And achieve that to long-term that your think you for this should do you could you financial goals? you able be I think us And

Ted Fernandez

but Well, said have we we of thought that, that and expecting profitability quarter Clearly, up I would the operate higher end quarter to for growth me us the first with the up consistent both the we was beautifully we at somebody statement. that. long-term sets since first targets. were revenue

of for any results. we're our year. continue going be Obviously, You balance year-to-date to momentum the look expect at and the then quarter when we delighted number second that of finish the to

high profitability to but but have that with there that the that and operate that end believe level. at we of kind long-term QX operate QX that both that the reported changed we the we -- provides So comment what targets? revenue No, expect we commentary and QX should in in adequately we in we'd to at prepared opportunity. said Clearly,

Vince Colicchio

remind the please many And what Yes. despite me are targets hearing it times.

Ted Fernandez

X% to the plus to line XX% the XX% on revenue drives on XX% bottom line.

Vince Colicchio

Ted. Good Thank Right. you quarter.

Operator

Next question…

Ted Fernandez

line Rob XX%-plus it I'm is XX% me correcting the on bottom bottom would sorry, here be to on the line.

Operator

The next question Capital is from Jeff ROTH Partners. Martin with

open. now is line Your

Jeff Martin

Ted to you. talk evening, and Good Good Thanks. Rob.

year? Ted, just client programs? significant could with of this a to little already, driving use on you curious example to growth your respect for it little an bit give more was touched if Maybe respect bit with case us give how but a a detail intelligence You that us is and, market

Ted Fernandez

an question. excellent It's, Okay.

First, for on Those assess able on Magic our the also organizations exist it opportunities feedback some applied product gives are especially, fundamentally there not not but to specific on side. ours only other also initiates initiates assess, around and organization with that side, organizations, I'm Gartner, and Jeff, where are those with its force but only knowledge. their force them compare, describe offering to their improvement verticals where help across market assess the Quadrant programs software segments, you're This very wave. around its like vendors an familiar -- sure and ability rate services to

program we've software those corporate that cloud that infrastructure to currently executive and success were did We been client, is the that a our encourage services it's expand clients. have on intelligence at. for market we looking with opportunity advisory program, the we've opportunity based significantly large the So, we had believe wings with companies who our something greater us research than

some provide segments we sure on credibility of software knowledge as providers using us I'm them. corporate that know services how there's intelligence -- depending, that imagine So are of that many there that help and across pick, to applied and that have, and XXX those large we you

the service building We drive areas able greatest the where capability we're that. the in strongest, will have be We opinion a sales team to clients. around launch started where and to we the greater these to

also marketing We've we've that a never to built to team. you the and dedicated size offerings. already sales that We're try know, sales As and started -- those of to marketing going large initiative. increase that team

even last the you this recall was in quarter, program annualized corporate value year. the of for said we excess contract or current our advisory in XX% if So combination, executive that

results year, of should revenue grew the growth investments that That saw sales in group with of areas, to allow grow grew the the you right XX% with quarter. Our believe the segments, and this right in those that line. We excess us and business. that XX% we the opportunity in marketing

Jeff Martin

that like and Seems Okay. fruition. some starting starting your call to Great. QX. got IP-as-a-Service, up year Would in sounds for breakout And things really it's QX are that? XXXX, you really then come like to you

Ted Fernandez

significant XXXX. to and way. and is and commented he for commenting the Well, that commenting platform not we've stand, And these Rob made XX benefit a been few in them since of to to large, want last happen the available we about look those on the to him these believe all future true I've throughout that our you the told investment partners But pilots conversations, a that platforms our discussions, said, the that basis. been answer, been platforms commercialize employed I we clearly some call years. if by is as of long, made we've hasn't which quarters, we them this I where expected I've our make where should strategic expect results yes, commercial investment

Jeff Martin

Okay. last And then Great. question me. for

mentioned, at earnings of You fourth bit was current or a environment call that I the was last on strong. that if curious, pricing a putting pace is pressure quite robust little quarter environment continues there?

Ted Fernandez

again, We bit recently. year put little increases more price need We a that We ago. a did did information. just through

these, of right retain we've demand market the we're success here which us time, So give we many experienced allow power recently. bit us having should a believe that little pricing we great with, that of to believe but for the services

Jeff Martin

That’s all for for your me. time. Thanks

Ted Fernandez

Thank you, Jeff.

Operator

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

Ted Fernandez

you We like call. quarter I'd the in to second first quarter. thank forward Well, participating to report when Thank you, again. our again earnings everyone updating we look for

Operator

call. today's concludes This your Thank participation. you for

disconnect may You at time. this

The Hackett Group, Inc. (HCKT) 13 May 222022 Q1 Earnings call transcript