Earnings call transcript Q2 2023

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Operator

Welcome to The Hackett Group Second Quarter Earnings Conference Call.

Your lines have been placed on a 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

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

on Hackett Group; answer myself, Rob here Fernandez, Speaking Financial and and today Officer. Chief are Chairman The questions Ted to of CEO Ramirez, call the your and

released wires announcement at A Eastern PM was press X:XX over the Time.

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

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

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

point, this Ted. I'd At like to to turn over it

Ted Fernandez

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

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

it comments, We and after will up then will strategy-related market open our which, Q&A. to review we

has they XXXX the very operating strong the middle year. results, in by our quarter QX year, our start results with at let to In QX by exceeding first prior $X.XX the XXXX, comps decision-making. mentioning move in to a results our the client of disrupt provide increases in me interest of half year guidance By had performance. XXXX rate the I growth, of the extended of to we started quarterly and will each resulted which our impact and least economic Before

Relative quarter, our our we $XX.X reported per and guidance. was share adjusted above of end which million, before second high revenue reimbursements to the this high guidance was the which of afternoon of end the of earnings at $X.XX

Although improvement. remain is volatility to productivity the digital for solutions drive competitive so is evident demand our transformation clients which and economic require

in growth of on has results Consistent was to previous This earnings resulted in significant X% sequential our the in with year. Solutions sales second Oracle swift call turnaround comments revenue quarter. the quarter last QX of our segment. exceed an our pronounced This from the and first most us allowed

Strategy up company by compared last Transformation was and which but Global total continue a segment year's driven down be our sequentially comp. quarterly to basis slightly when to strong on Our results Business reported

in higher Our and Advisory sequentially expect IPaaS grew sales strong offering recurring Research sequential growth sales and margin QX. we

able to XXXX. we Report. XX% this to contract we an we Intelligence of of be published Receivables achieve Customer-to-Cash couple pilots are If a able in IPaaS and should annual QX, momentum our growth value Market close continues In

second Coupa, IBM will finance intend up quarter, service and outsourcing compare intelligence SAP, first evaluates to as which and companies will providers as intelligence companies two TCS. Accenture, include analyze additional software reports: publish such and market we purchase-to-pay in Arriba In third such market we the the report the and accounting Oracle;

Value is intelligence report market unique for Matrix. on the differentiated companies approach our to value both essential delivered assess makes Hackett capabilities measurable What and our

and to measure enhance through realized Our service value that automation unique performance. insight improvements customers' ability is our business

aggregate planning Management Enterprise one and of view specialized enterprise of will total that plus analysis three-part an report Performance include management. performance consolidation a is next budgeting, Our enterprise

early providers. services By to we additional intend and six software issue of evaluations XXXX,

to intelligence measurable market learn impact how deliver. the the their to strengths solutions – they companies the reports compare as providers, value our and providers represent as opportunities, critical well Our to competitors',

which help sell providers to in are depicted use market through Hackett our Value and Hackett solutions conclusions, digital their of Our Matrix and tools. licensing the to

services providers We executive market also to advise advisory benchmarking better. apply the their base software Providers perform A how consulting only intelligence can to solutions adapt inform the customer and large benefit. can ones purchase to and decisions. aren't report and

based our as are platform Connect. well the to launch enhancements state-of-the-art to new the allow our differentiates to This by highly critical Hackett existing our and metrics practices of proven of these insight and knowledge of as themselves new on member as proprietary members implementation All avail advice. expert practitioners, and and which will all is benchmarking new platform applied delivered research which expertise

our We Solutions organization's Oracle The we quarter are received that basis on most will efforts. strongly powerful another sequential the sales also transformative of channel. Oracle that benefit completed engagements users of to believe one significant started from building segment expert as strong is in a can one up which as support the this quarter. from network. This continue we experience expected and first community sold, was result market strong a We we several a demand and

platforms, and higher-than-expected service These have our software are the our of Digital Hackett DTP IP are its and sales Transformation relationships Our or offerings paying made providers momentum develop enterprise. The global all differentiate of highly state-of-the-art and include our Platform us across licensing SAP platforms proprietary to also Leap new software we off. with allowing activity. development and our continued to benchmarking research the Solutions digital our which fully and platform Quantum segment digitize investments with

and significantly platform to tools Hackett way. and members access to experts ever-improving two and launch of ability IP our community Connect the The provides users with our engage shortly in their of of also our these platforms an improves

the pay-down accelerate credit our On the throughout to flow expect sheet to cash year. outstanding our the balance of us facility can side, the of operations you use from balance

by said, let aggressive credit me more to our sheet be our while acquisitions and current results, to facility that balance With continuing in to using on on buyback invest outlook. want cash ask our and Rob operating to business. fund comment provide details also flow our stock, with we Longer-term,

I additional comments and following on will market strategy Rob? comments. Rob's make

Rob Ramirez

Ted. Thank you,

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

our regarding Solutions segment, Oracle total this SAP segment, of the purposes our call, Solutions For global of S&BT comment I will and our the segment separately revenues company.

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

Our SAP Oracle and and Solutions total be offerings, Reimbursable will clients our we before expenses our are travel-related and our through revenue our primarily associated revenues discussion. Oracle to Please segments no that to passed project note, expenses SAP profitability. referencing our reimbursements that Solutions the results respectively. include of impact both in have

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

our of quarter total second the was $XX.X For revenue XXXX, million.

reimbursements Our end high above million, revenues which were guidance. before quarterly $XX.X of was the our

from X.X% compared second for in The reimbursements second global was our revenue when the was quarter prior prior ratio revenues on the million compared to to XXXX. quarter and period reimbursable the same X% quarter expense before of in segment X.X% $XX.X Total S&BT as year. the

was transformation for to client second XXXX, Revenues the with a as decrease of X.X% reimbursements business when consistent the year. quarter before same This $XX our of S&BT guidance for global extended compared in decision-making engagements. period impacted was the prior million segment,

were the comparisons post-COVID demand year. against we prior the Additionally, half experienced the throughout first of accelerated

of second our Total XXXX, well quarter of the second million was sequential reimbursements the compared was Revenues when prior in increase increase of segment period $XX.X Solutions of as Solutions year, before a an million the $XX.X for revenues from our same XXXX. the for to Oracle XX.X%. quarter segment Oracle X.X% for as

deals. provided momentum expectations continued second guidance drove growth sequential last strong Solutions quarter and growth. million when of we second of segment due was a quarter $XX.X earlier-than-expected to cloud year-over-year Total sale the we for also SAP the our accelerate exceeded and quarter revenue license and discussed of The number from revenues XXXX to

which revenues, year. $XX.X total services multiyear for our managed reimbursements when reimbursements segment, to SAP second the quarter benchmarks contracts. company our recurring before the and in multiyear of consist and was of before XXXX, Approximately same XX.X% of advisory, an research for million XX% increase of Solutions period Revenues subscription-based compared our revenues IP-as-a-Service, prior the includes application

compensation totaled $XX.X the exclude XX.X% Total prior of the company sales, of million expense reimbursements in to cost quarter in of before stock-based compared $XX.X reimbursable before XXXX or year. of million second reimbursements adjusted and revenues XX.X% or as revenues which expenses noncash

to the the headcount revenues in at period. XXXX. consultant end in expense at excludes consultant and non-cash XX.X% quarter, quarter total year of reimbursements the and company Total of XX.X% the which the Total prior as before X,XXX was the gross quarter of X,XXX second second to company of headcount the second company previous expenses margin end compared was X,XXX as compensation stock-based quarter compared on of adjusted reimbursable in XXXX,

prior absolute is asset investments XX.X% offerings. million reimbursements sales making second the of our XXXX. second SG&A our market due dedicated in This of revenues Adjusted the compensation expense benchmarking, which investments and $XX.X we're and of million compared quarter $X.XX before revenues for approximated was or dollar non-cash IP-as-a-Service intelligence to or $XX.X advisory, quarter in reimbursements amortization XXXX. primarily executive year. to in increase incremental The the XX.X% excludes These stock-based in resources year-over-year before is of intangible

$X.X quarter of earnings compares of million in expense Adjusted excludes diluted noncash in the or XX.X% $X.XX GAAP which as before $XX.X diluted of before prior million income to revenues million the for revenues compensation stock-based reimbursements reimbursements per the prior earnings XX.X% of or year. of income in second or per of the net $XX.X compared million second and the $XX.X was year. share quarter quarter second $X.XX XXXX of to of net share XXXX, or GAAP totaled EBITDA,

for common excludes totaled which was amortization which noncash high guidance compensation share adjusted diluted XXXX, quarter expense end net income intangible of $XX.X earnings income, million and stock-based or second at net the our the Adjusted of of $X.XX range. per

as second of to of share $X.XX adjusted compares movements by results XXXX to currency. diluted due million impacted $XX.X quarter quarter second million second per $XX.X net the at income adjusted The the This in common prior of unfavorable compared or the quarter at $XX.X of were year. million in to the end were income negatively quarter. balances $X.XX previous The foreign net of of end the cash company's the

$X.X provided offset in for cash and accrued adjusted the by Net expenses activities in increases operating accounts income was million, net driven increases receivable. primarily quarter partially in non-cash by activity by

compared sales the on due large outstanding the primarily XX to This end days slightly of the at of engagements client DSO first half quarter. in quarter was the that the during of the previous Our we've terms is days end XX year. days at as increase begun to unfavorable

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

the stock repurchase remaining was authorization $XX.X end of Our the million. at quarter

During the second company's million. at quarter, total down balance paid debt facility. end million the The was the of on outstanding the credit quarter $X $XX of our company the

debt year. to is plan further Our paydowns the through balance of accelerate the

was expense to dividend of on recent September At quarter quarterly of shareholders XX, to for per Board for declared on paid XXXX. X share subsequent of the third October $XXX,XXX. end its be interest quarter Net Directors the XXXX meeting the $X.XX its company's record most

quarter. in of move I'll be the million guidance the our of reimbursements for million. XXXX quarter for now to range third $XX.X company estimates before third The to $XX.X to the total revenues

reimbursements before to to year. expect up the when global compared We be revenue segment S&BT prior

before strongly We to up reimbursements be Oracle year. prior revenue compared to the segment Solutions expect when

GAAP to the Solutions We estimate revenue be income quarter rate expected $X.XX on $X.XX, cloud per which due primarily sales. license expect a common to before We in share on down segment diluted of to decreases in reimbursements net to tax XX.X%. be of a earnings third of range adjusted in SAP adjusted XXXX the year-over-year assumes basis, effective

market resources by As intelligence dedicated the impact and executive sales Ted mentioned costs net making the will for our last per investments quarter, adding development income we approximately offerings. dedicated continued $X.XX. diluted quarter in common These program reflect share benchmarking third expected our our advisory, incremental are incremental to are IP-as-a-Service

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

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

We before expect of in third reimbursements quarter adjusted approximately EBITDA XX% range the to be on to XX%. revenues

expect cash flow a basis. from we on operations to sequential Lastly, be up

I point, our like to over Ted would this to it At for turn and strategic market to back months. outlook coming the priorities review

Ted Fernandez

you, Rob. Thank

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

created As I for it demand rates to extended the as organizations increasing by is repeatedly is competing affect. impacted intended the interest by say, and transformation priorities digital demand being disruption, decision-making the asset which

automation and Digital businesses and and However, clear enterprise it continues analytics cloud dramatically innovation influencing to workflow way services. the be infrastructure priority artificial our deliver for clients. applications their compete and a cloud are intelligence strategic

Digital change to adopt these to remain at forcing capabilities transformation activities an all to targeted productivity and redefining and competitive accelerated pace is new fundamentally gains. organizations realize

become the and and we spend XXXX believe reductions cost we throughout productivity headwinds make with assess industry core year that their the economic of we As the to behavior believe which offerings. rebalance mentioned headcount of will our see to risk their the use, beginning planning at will spend strategic and year. also the clients We their improved reduction the the comfortable efforts, and beginning process year year-end with are clients and more

be until more the many strong of late of year. by by did have us, been strong year, challenged the -- will year-over-year of the demand clients of or half last the to and not Similar more year-over-year challenged QX comparisons in our disruption experience the first

most the compared we of look when when we If half behavior first XXXX. half However, which further to favorable half will face the this of second at correct, year. will support expect the are more in improvement, comps second the the we

and competition to provides moderate their and hybrid we a to trend access during On executives to the effective respective to retain, travel requirements provides demanding responsibilities industry. we to perform talent remotely, of should the talent expect the personal side, which delivery for valuable flexibility defined have struggled model is continues. with model, greater associates Overall, and to term, continue. to This clients their which allow and our teams. allowing them. Longer us turnover our that with transitioned quarter experienced continue attract we is hybrid saw us retain very our the to sales because This and have us historical of

development focus our by The the sales and investment recurring marketing dedicated by I comments to high-margin previously, decrease made accelerating are we on adding those, Strategically, to IP-related services, which resources new and programs on will intelligence $X.XX. aggressively of our detailed results our we market increasing QX area. this the

AI member side, we on functionality generative plan investment the continue Hackett platform new CapEx in on to introduce Additionally, will our Connect our XXXX. and

over benchmarking Coupa services through been our XX% revenues and This transformation has OneStream Simply IP Oracle rely see put, our from and excess and years. It our also effect Consulting that advisory to in more Services. downstream business utilize research we is to likely continue last research important the note, strong halo are who services. to and consulting several our on organizations benchmarking of clients

the beyond We will new syndicate exploring which our agreement through of that will on us X. launched in IP an allow content allow to We and syndication focus our Global strategic IPs partnerships, manner. channels reach April our efficient are to and us first also XXXX

to our continue evaluate IP platforms. new in our channels We for

benefit allows and allow realization transformation leverage our us digital to flow effort. respective redefine value to our client deliver of It less these decisions our IP software also life accelerate to and configuration to software-as-a-service digital significantly Quantum benchmarking in platform create clients our enhancements along platforms. our -- information We transformation through leadership, also compelling platforms assessments, This with more of with the global over the benchmark effort. initiatives, continue case process their the solution track Leap,

no market. there platforms IP-led We are in believe the comparable that

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

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

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

my conclude That'll comments.

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

Operator

you. Thank

will Our Martin comes begin with [Operator Instructions] question the We Jeff Roth now question-and-answer from MKM. session. first

Your line is open.

Jeff Martin

evening, Ted how Rob, Good are and Thanks. you?

Ted Fernandez

Great. How are you?

Jeff Martin

a hood you launch generative mentioned under in early look give Ted, like? Thanks. Good. the XXXX. you peek that might an what product AI, Could

Ted Fernandez

at we're to GenAI; clients later. advise both looking exactly use on cases rather than first, Well, benefit from on what -- sooner can things they two our ability

exhaustive areas, that start enterprise. of see that So XXX can prioritizing initiatives. one way where process to which the That's specific an looking sure their can doing making capabilities business assessment we of all total the of define GenAI exactly our actually beyond soon. they them advantage into activities we're as And

click a individuals idea We're efficiently engage -- we're want really to device able a An type efficient try more morning even ever more this clients that mobile for being create ways of know strict either But idea going is the some to reviewed of different language able or be considering to on laptop. to like to concept today. some our or without content around we model the in example, Hackett. consistently both. We to with large we significantly On engage own example a our at end, than we to looking of partner. -- are without

some what kind training know we the is as But obviously, at powerful data we idea have. detailed by capability and of thinking can deploying kind considering an provide initiatives. two and that the data, side client our aggressively our any those examples that of day driving client their more so what the be looking simply mind question both would of Hackett they're our that information clients we're or our strategic and at and given some base -- IP of to But we're XXXX. whatever how of the in members is again the So productivity on their with training and we getting on a our provide on what one posing data, will as about we example point to

Jeff Martin

intelligence? And what wanted of And then the to size an in timing then that market sales start reaction might Great. to kind be ask contract engagements from do the expect? And what would to you're finally be? initial market what of you And think you launch? what intelligence getting related average cycle might considered

Ted Fernandez

Well, the we'll get I've procure-to-pay before actual said publishing CXC up first published assessment to the end that here we're our quarter. the out on and as with next accounting the follow that finance side, or report week outsourcing so. hope And software and the call, third was in of

trying as possibly we're we quickly can. to of So number still these a out put first as

and the been engagement The has on participation both favorable. post side

want sure go participants that and really we're insight exactly the to make them, programs out we influence and that that's benefit see for thing how is us in we important the to that really The coming. as is that both in you we everyone can call the weighing valuable as well complete both clients to provide have to first want so tranche know where we it this if that to do the

we investments like meaningful of in sales IP see been our in the to resource the in would engagement, impact think is meaningful terms that materializing increase all making programs of would impact XXXX. be start middle of To the numbers that have like see when of beginning to within number monetization those to hope significant just a of service to our we sales more what the XXXX, we've ranks the executive of we I like of and both specific,

from QX. the strongly improve expecting said we improvement as we I sales see expect that call, QX to to as from currently the saw from my on if we QX, we're -- sequential If QX a growth as good

improvement We from sequential to QX. expect QX stronger

as programs that sales continues, see on just as both the advisory the all kind you already If of market will which of resources of impact the the impact on our intelligence programs in the place. sales of cadence and rollout across then executive them well are

Jeff Martin

from the development you might or up impact I then was a QX? mentioned program resources. $X.XX like in might do QX. in think $X.XX we QX? and investments you sales QX. know And QX in it Great. in look sales $X.XX personnel What it impact to and expect That's in What

Ted Fernandez

We would expect it to be similar.

quarter. expect no in ended that impacted We're was what be when know We any be to would believe going seeing to expect be that's QX. $X.XX that to being we be the roll the but into won't in that $X.XX the have it be next I so We to and actually expected reason have and resources it in QX to reason up quarter. it no different. is came just $X.XX $X.XX. it it spend We to thought

Jeff Martin

on than then Great. addition in adding headcount you of more And areas others? aggressively consultant side what the are terms the

Ted Fernandez

we're Solutions to group. ignore incredible performance Oracle and performance getting that Well, this our it's from hard

we though both aggressively even and onshore we've kind of that offshore to since went been that through latter experiencing. at So, handle part QX been that resources demand of volatility the we've hiring year-end

So, be the would area. primary that

the continue the going is additional QX and say Those to into hiring two all largest second I'm And resources. primary QX. of in hiring sales areas area the be then these will both

Jeff Martin

time. your for you Thank Great.

Operator

Research. [Operator Instructions] with Vincent next Our comes question from Colicchio Barrington

Your line is open.

Vincent Colicchio

the prepared please? Could repeat your GS&BT remarks growth QX. for Rob Solutions didn't hear that you I and Yes. outlook on in Oracle

Rob Ramirez

we Oracle SAP strongly. And would would Sure. up said that that be was down. be up S&BT be What would

Vincent Colicchio

year-over-year? And that's

Rob Ramirez

year-over-year. That's

Vincent Colicchio

Okay. because than $X.XX was than less for Thank that Ted, the expected that. expected? you longer hiring salespeople cost taking was

Ted Fernandez

the yes, quarter. but the came some in changes, some later had We in of Yes. resources

Vincent Colicchio

least you doing Are already companies work? research are folks you type the need, at that from people of finding right

Ted Fernandez

trying that finding And to we in We're their do Yes. interest we're what change. find high. extremely We expect Yes. be to to don't them.

Vincent Colicchio

from I or of said for programs in in plan you're last And ask? the it with just you've for know it early were launched too to next revenue intelligence is early revenue looking even too first market be programs And Okay. the meaningful year. you Is that early come year. expect that Has to December meaningful?

Ted Fernandez

early coming measurement I salespeople I've program the expect QX five how the we from based remember too published no are and QX, ago, reason we QX since productivity onboard early. from making experiencing. is that's the and just Too And think are QX, biggest are CXC that weeks about improvement they -- so improvement But said, the the that productivity saw progressing. as to strong on activity we to just of

programs. important trying the programs. subscription to intelligence of our member have programs speaks increase is -- that And that, that to we market or then, to So the saw we're number basis on existing most we a

programs that of essence, in for programs the sales but have, significant is force we in primary number which we place of the the that more doubling we than have. of existing have are number So the which that productivity salespeople the with

to had when quadruple the in force we by that still end But And XXXX. heard say the that. the me to started double we to to trying achieve thereof yes we you've As had close goal we're place our or are XXXX programs as do? trying what been investors sales and of

Vincent Colicchio

have to salespeople plan how year-end? you you And have many by do now? how do And many

Ted Fernandez

onboard, we it's XX group this around brought and that In counting.

Vincent Colicchio

strength one in And any for are and now terms Okay. also Solutions, balanced pipeline? particularly large the The you're it one in last ramping Oracle in is me. deals the of or there there business

Ted Fernandez

very channel. some previous of come clients support us both have some door from, needed Oracle think that we kind seen they the walk result some the clients back a ours implemented assistance. with of been clients closed getting I call and help as with deals brand for excellent they've I new collaboration seeing And as We've significant as would of we're of number what sales -- deals Both. we've in peppered the significant Oracle to that

Vincent Colicchio

Ted. Okay. Thanks

Operator

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

Ted Fernandez

forward in our And for updating thank quarter. look everyone, the report third everyone Well, we you. participating to earnings call. when Thank quarter's we second

Operator

your for in today's you conference. participation Thank

disconnect at this You may time.

The Hackett Group, Inc. (HCKT) 8 Aug 232023 Q2 Earnings call transcript