HCKT - Earnings call 4 2023 | The Hackett Group, Inc.

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Operator

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

Robert Ramirez

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

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

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

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

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

the the are to about Before relate statements session, in not performance. comments I the and which we current federal would our we forward-looking future to of question-and-answer future expected begin, remind estimates a securities like you the laws. be and statements that of projections in for may following These will guarantee expectations, results, making be statements and purposes

that like be vary. and and particularly predict this are I the detailed uncertainties to risks, information, statements forward-looking it risk conjunction These Actual to involve accurate. only over with should be the would contained filings. our assumptions At They turn SEC in difficult point, in considered not to results factors Ted. may which may

Ted Fernandez

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

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

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

$XX.X reported afternoon, total we This of million. revenues

earnings also our the of high was which $X.XX, high end which million, our was $XX.X the above of reimbursement of before guidance, adjusted and share revenues end per guidance. of Our above

the consistent demand increase our the since driven were performance that in the quarter. experiencing in is our for the the that was which results notable performance An in Our historically is strong up segment that development momentum we strongly. offering. segment This second experienced important enterprise Oracle Solutions have with of management segment, we're by

compared year. when up was segment to S&BT global last Our

Although an Gen the initiatives. market impacted we conditions, in interest to see was AI by segment continue increased

our number to assessment client us unique launched new feedback. Explorer, needs, AI led significant opportunities. to readiness a It transformation favorable Gen ability recently More has of showcase and importantly, enabling platform, effect is to identify organizational AI our receiving

trusted benchmark Repository We road is Gen Case emerging creating maps interest broadly an journey. are unique and entirely opportunity analysis a clients our clients' related our The AI rapidly case is Use to benefit recognized to become Explorer strategically. architects leveraging expand access AI new growing to to data AI rapidly way Gen with using AI Gen engage our strategic our performance of establish base. improvement creating highly

year-over-year down a basis revenues the SAP but Our the its the made performance, not investments end solid segment was year. on we the continued as to during generate until of did sales year Solutions start

However, benefit this the first of XXXX. half should

IP-based to aggressively our invest -- also programs. our continue growing in We growing in

powerful combination emphasizing enhancing expert of and IP expertise highly in advisory to more and research. of knowledge executive resulting pricing are existing We practitioners, programs architecture a focused adviser product applied access and our the our

themselves October. and as new programs All research, our practices metrics launched existing new to benchmarking our state-of-the-art to IP. member as fully platform, advisory of experts, our This now all Connect, of through delivered well our allows which are our executive platform in members Hackett avail best new

during what our we to expected While our the were these increase, rates continues lower offerings pipeline than for year. conversion

increasing did XXXX, value with expect in their offering. but foundational lack work of to of rates our all XXXX. hires the growth primarily year grew In lower contract annual the believe we lead We number conversion in due to during the the we new were large of familiarity XXXX and to X%,

down the in balance operations to our strong to short On could cash us of pay use you term, our to continue flow from sheet outstanding balance facility. our side, the expect credit

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

Robert Ramirez

Thank you, Ted.

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

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

our of offerings, benchmark advisory our North international transformation and results our our offerings. Our iPass global the business S&BT America segment executive OneStream and programs, includes and

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

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

We in will the call the Investor this reconciliations website. GAAP information included and earlier from on page additional have our based Relations filed post non-GAAP of company's today any to discussion to press of measures the release financial

was mentioned, For our X% revenue the million, the over $XX.X up year. prior fourth XXXX, quarter of Ted as total

end were and our the expense X.X% reimbursements X% reimbursable fourth reimbursements the the of when was guidance, the revenues also up the on over X.X% quarter prior compared as high in which prior same before year. period prior to year. above The million, quarter $XX.X quarterly X.X% ratio compared to before revenues in was Our

revenues the were million S&BT the for prior for were million of fourth were Total quarter from X% when Oracle quarter an fourth revenues increase the million an when $XX of same quarter Revenues our the our period before the XXXX. for XX.X% fourth 'XX segment XXXX. reimbursements from to for year. the the increase global our reimbursements in for Total for before $XX.X of $XX.X were of the of $XX.X to compared Solutions segment same fourth segment quarter, segment compared Oracle million, prior Revenues global Solutions million in our year. period S&BT

periods. before This the strong second is SAP over with X million year, the of SAP the 'XX, X% when segment a Solutions year last with segment we've revenues Solutions million from when provided the for $XX.X quarters our double-digit experienced consistent our with since prior for guidance $XX.X quarter compared we Total 'XX. period of were the the to fourth Revenues reimbursements to were in growth quarter quarter. quarter, the prior last consistent momentum compared for same the fourth decrease of

we multiyear revenues investments multiyear as Approximately which 'XX before to made services of managed subscription-based and includes sales reimbursements in contracts. growth consist The during application our contribute XXXX. our total recurring, service, benchmarks to a executive expected IP are and revenues, company XX% of advisory,

XXXX a of fourth the the compared year. consultant company revenues at prior count cost the expense, totaled end before previous quarter X,XXX to of the consultant reimbursable company end in X,XXX of count prior head Total total the fourth compared quarter at year. as quarter was and the head of X,XXX of Total compensation of as of $XX.X the expenses million of revenues noncash to or fourth stock-based quarter company XX.X% million $XX.X reimbursements or exclude reimbursements sales, in in XX.X% the and which adjusted before

stock-based compensation Total to company This the primarily adjusted head the which margin gross utilization expenses due fourth was and expense, the to XX.X% and in revenues increased lower quarter count XXXX before compared of XX.X% reimbursements, in decrease in on fourth excludes as quarter. year period. is noncash prior reimbursable

reimbursements of Gartner was and excludes compensation Adjusted expense to for reimbursements dollar $XX.X or in 'XX. our to quarter service executive is primarily fourth XX.X% settlement year. making costs, absolute prior increase before advisory we're and of and year-over-year SG&A, investments which million offerings. dedicated XX.X% million in stock-based The $XX.X compared revenues the legal or before resources sales is noncash the This revenues due incremental related of

which quarter reimbursements legal previously as XX% costs, of compensation quarter year. or settlement stock-based of $X.XX revenues EBITDA, or $XX.X These million investments the before prior reimbursements noncash 'XX $XX.X approximated compared Adjusted XXXX. related was in million and onetime of the the before and fourth mentioned revenues expense fourth to of in excludes in XX.X% the

$X.X share income per and includes of the $X.XX per compares earnings earnings for previous per related quarter million diluted share. GAAP earnings net when net to fourth the $X.X income $X.XX 'XX year. or $X.XX a onetime diluted settlement the legal of of diluted share with net of quarter million or in income per of totaled of costs GAAP million $X.X fourth GAAP

end or which XXXX, $X.XX totaled income, stock-based of net noncash of of the quarter of million common excludes the legal in year. adjusted of diluted per our $XX.X This adjusted income compares fourth above high net or earnings income compensation $XX.X guidance and diluted to adjusted of the share range. net income was the quarter $X.XX, million settlement prior Adjusted share per the common which expense fourth net for

driven provided end the The as 'XX quarter income net by million by $XX.X activity the previous balances adjusted end noncash and fourth to days at million, company's cash activities receivable the of $X.X of at related outstanding. the in cash the and primarily million sales Net were was accounts $XX of compared quarter operating for in decreases quarter.

at compared end at XXXX. to Our days the of the to XX days end and of XX XX end DSO quarter at of the quarter previous fourth as the quarter days as was of the compared the

debt paid quarter The on $XXX,XXX. the the balance the During interest approximately facility. the the $XX outstanding quarter was million. of of credit million was at company $XX Net fourth company's the our down expense total quarter, for end

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

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

discussing XXXX. to of move going for our quarter to first guidance the now I'm

Before I QX. sequentially seasonality from like to as business everyone that, move of do of relative to to our we costs QX I'd the remind

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

first reimbursements estimates XXXX quarter $XX $XX.X million of range revenue the million. of company in before The for be total to the to

Solutions tax Oracle up diluted We expect We all to in of when which up in to X first share estimate the segment range revenues to adjusted strongly. common reimbursements a with rate per of the GAAP of be be prior effective XX%. earnings before income assumes $X.XX adjusted the to on compared net quarter $X.XX, XXXX year

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

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

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

impact payment share the to we performance-related excluding Lastly, restricted the the of due and to cash buyback of vesting by shares. expect activity, taxable net of holding bonuses of employee balances, triggered income XXXX payment be tempered

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

Ted Fernandez

Thank you, Rob.

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

to digital impacted and competing Although is remains demand rates for priorities organizations by by extended disruption, continues decision-making assess affect. strong, the which as interest be high intended to it demand transformation created

well services. way applications, and as cloud intelligence influencing deliver analytics dramatically the enterprise and compete automation innovation their as artificial are Digital workflow businesses

drive the level AI new what's for to all the It's software standards, and of digital and will unlimited value driving an So world-class potential new? emerging extend offerings. providers performance It's demand attention of their services rapidly possibly entirely Gen existing

to which unprecedented have consider. believe this in will an organizations innovation, will all We result

access quarter, and remained hybrid On for experienced clients the the Longer to continue have during saw the their our to sales turnover to effective and to term, Overall, trend low continue. competition and we and moderate continues. model, which respective expect that delivery talent transitioned executives we teams. we side, provides a

have area. This This remotely, accelerated them. us defined this personal our by development sales retain talent. model greater is on we perform valuable our increasing the and and of which resources to associates and their to to to hybrid with flexibility IP-related new marketing very high-margin allow programs attract focus dedicated responsibilities services recurring should provides our Strategically,

member Connect platform. our We invest is continue new are What making also our new investment AI accelerated in capabilities. on the and Gen to focus Hackett is we

impact AI the the Explorer Gen of are integrate across vehicle the to We our AI all as offerings. platform utilizing

data us We have support our of and critical advisers architecture hired to our This further consultants technology AI critical also Gen become resources clients' efforts. to and architects, journey. will allow

AI powerful Our will clients ability providers with our the unlimited about along way impact to of to Gen utilizing Case AI measure and our the opportunities Repository, growing Gen is consider. a assess the through respective solution they market Use guide help have to intelligence

primarily We see for business technology to what innovation objective this to has an an story. a as organization been our opportunity provide perspective this

market several and effect see to benchmarking who our continue offering, only platforms has business on strong our downstream also advisory clients services. approximately are our and be XX% our from more by likely application this This and solutioning our been over We and Explorer services. organizations AI advisory believe last to for rely halo to transformation assessment, we revenues consulting executive utilize years, intelligence the cloud expanded consulting will

continue our publish also and receivables with We customer market most several performance to finance recent and outsourcing, enterprise focused to accounting reports of management the dimensions on reports creation. intelligence

to insight insight implementation realization provide measure unique and our accelerates customer's business that is Our a ability value performance.

our our research soon will is important Explorer content publish AI and We solution executive key which AI and on reports for programs. advisory Gen providers,

compare learn competitors measurable represent Our report market as their as value impact providers. intelligence how critical well The to company solutions the deliver. they to

to advisory and the purchases executive services also and reports inform decision. intelligence acquire market software benchmarking large can Our base and consulting customer

are to manner. exploring will efficient allow through allow new our us partnerships channels. current sell IP This our We strategic that to XXXX Global beyond also will in us reach an focus

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

will emerging integration We the standards value believe our and fully Explorer IP digital AI use of aligns performance and cases. the technology that the be perspective world-class new significantly these related our with achieved platforms to AI Gen enhances on of due

familiar that Relations Leap I As of investors our become on in page we a the with calls, of have our Quantum utilize previous platforms. and mentioned can Investor XX-minute to demo website more DTP the capabilities

adding videos that our also are Explorer Connect Hackett AI and preview We platforms.

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

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

Those my conclude comments.

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

Operator

Craig-Hallum. [Operator Instructions] George Sutton with

George Sutton

Explorer them it's the extends wondered I'm a some could how work broader how as it your you Can walk an way and do that that clients, then you to AI how company, Ted, exactly thought said. you engage offering? through take through for you into entirely walk works? compelled just particularly I by if new into

Ted Fernandez

Okay.

clients will demand emerging also engage they services that. that have is be increase. active let in me an fact to say, to, channel you only do to to which going And that providers are and want requires me this correct Let strategically, and software comment this on opportunity first, the prominent all if I

very scheduled, had and call it's held effort number are than release have all we to We've received. of for new even more date level in issued has So we've proposals been I'll meetings it, ever of Explorer and this of the significant launched. terms significant any very, us AI that other,

IP, Gen the technologies, the and XXX across which But and processes. we taxonomy. digital against We those that we benchmarking evaluate said, activities with individual our compare of AI enterprise functions transformation for it's align take the at over are know, process and our business all processes you look -- emerging. We as

So you activities, leveraging networks, neural language if way that fact been than how the We've cases. look a leveraging or of a digital chatbot you're both months. or strategic building at machine this learning, model, we've in some impact doing assistant functions does that a large combination leveraging more review for hundreds and identified X use

to to achieving. us for level cost, time, if AI We compare So the we impact. allows the it's then service It wanted client's call one, they're allowed activities and client that again for evaluate Gen us levels opportunity actual that functions a in to: against incurring, of client only a will to We tell use drive case. that currently believe activities results the that not that Leap compare it numbers can value the they're value. in we that that which highest so exists measurement to capability Quantum the benefit

-- wants walk could something we incremental growing more at to help that do simply It throughout can also priorities. something bifunctional ambitious then be group use and client can it be transformative these again, the a decide We look do highly more -- productivity breakthrough. an clients, aggressive that -- the use to to enterprise repository or establish impact. what or would be functional for can at can prioritize opportunities that client workforce case we the would client then be our then and A calling client, very and

that them large breakthrough investments in intended achieve the performance required the impact. to for everyone data models as some requires actually order But harmonization have these will out to language is finding of the support

clients are allow at data time, harmonization looking to about same innovation the of the and So most breakthrough that start. at very will that them will this how their to Gen position they data see AI clients really offer. standards efforts are deciding the But we want serious

So in in like been are a clients what's of the strongly. of scenarios the business most what other bring of now do technology a we've the week story to believe framed of and clients about very most And that proposal the from what's with over we organizational it last front somebody that providers we things I all since perspective, for see to that impact, we the impact, in front really the perspective. being looking prioritize, how the is

of year Quantum now So can being themselves people for new assets, well our if Hackett take all and benchmarking that a and that must Connect be this for it and But the the has wanted, we significant boy, activity the avail it's been as you sure us, they're JI DTP is a think consider. us throughout of IP, research think since and It a the happy will clients to as before the rapid, through that we've Explorer that the move very significant make innovation we're enveloped activity We Leap end by been of effort. the year pretty effort the launched promising. year. seen I beginning that

George Sutton

detail. helpful very That's

I Could wasn't the on discussion much intelligence much the Gartner how through any. walk intelligence this market caused or us? that that lot market that this a you and I'm side, just perspective, has of if impact call comments. prepared on how on has issue -- wondered So for from there curious at least

Ted Fernandez

was important we The as you a, noncompete more issue, Sales of hired agreement, Gartner call individual where The it, in Head enforced Connecticut. recruiting had individuals I that to one. very related would referred None. a which was it, a

Executive to of we took from X, Sales Advisory when which that that any returning will and Gartner, be precluded of period with out would them X-year direct activity November Global he sales compete ends. Head until is his is So related

customer about individual, we've weeks leader fortunate. court smoothly made hiring other issues, We X were our to as renewals that believe replace that that we second the of was position transition. some addressed very that and service got We talented which that from after individual were can. We they enforceable. their think notice we support -- very this as We the a

and we're team. great it prepared the investments of a my have it our Explorer not him now reports year, forward we but brock be support not how interim questions AI head intend part only worthy. said our impacted, to little I and execution, do but we are here on our of to who No on I what's also rely intelligence or And referred support comments, market therefore, Explorer just board. initiatives. a the to the flash, they my consider. do opportunity, had prioritize becomes I have at no we're programs will and end what the should impact that leader delighted to But them in as of and 'XX, a which want a critical 'XX I that I they intelligence a perspective use make development business they the have to impact to us how vendors may lot market of on because executive of AI believe in looking advisory Gen as a element right? Therefore, bit AI well And the on of lead of to disrupted

George Sutton

you. Got

until So back the he to just come guys. Thanks, on he sure gets day X votes November X. next can't on make November

Ted Fernandez

go. conflict in He's ready busy things do not that don't agreement. with his We'll to keep him worry.

Operator

ROTH is Martin [Operator Instructions] Jeff caller Our with MKM. next

Jeff Martin

is more salespeople, what combination more detail see sources of not conversion if you seasoned in elaborate a on go Is offering, that. it become new in be giving more having Maybe wondered helpful. could XXXX. acceleration would as it Is that on rates growth first them a it I Ted, the you touch seasoned up?

Ted Fernandez

great above, I and of the Yes. all health. mean obviously, time

we the the some programs. During and also were improving year, changing of

out some relative not we October Hackett only of those obviously November Connect. market, even the which familiar becoming with So enhancements, included rollout take they in our strength but -- to how were rolling to were

made. and we tremendous of work again, So amount investment that

listen, it intended. are not way that originally we from should prevent services those with the So even growing us disruption, some

Jeff Martin

programs? towards $X.XX Are the first could. for kind Great. published year. impact It I if or core like foreseeable $X.XX them the And couple you of then and back mean, of bit, X of the cadence much the market even to X you revenue we last or the you seeing sounds from another little plan intelligence the in published or of middle fall future. a

Ted Fernandez

We programs these rolling very that, revenue the low as out would the project No. part need you latter in since of be know, year. we

is expect again, contribute growth we in to our But them no. So to XXXX. answer the

Jeff Martin

And Okay. then back XX% about a you perhaps the growth about and should in care EPS revenue growth. pro could acceleration that? how quantify about I think where model? we typically, target stronger to forma the Is an we think that How X% know half this you growth year? acceleration should XXXX. think is we should than Or

Ted Fernandez

to line quarter do. provide we're We'll go contribution. through update normally quarterly for We guidance we Well, you we'll set allow play out, we the growth, we'll in as XX%. excess that that XX% X% that provide at as as the our XX%, bottom and near quarterly know, obviously we of know If and anywhere we'll you guidance, profits grow every generate same. we

no. So

no If -- not you're to Jeff, discipline change asking me prepared the to annual moment. I'm at provide guidance, my

Operator

next is with Vincent caller Our Barrington Research. Colicchio

Vincent Colicchio

force. understanding do in And you their bundling success if is seeing to So throughout that see some Are services Ted, year? of the sales is curious, success there? expect I'm one focuses. the you not, area of some My

Ted Fernandez

yes. carry services. They support If about. S&BT sale segment, bag sales that to that a supports all answer which force is it's includes our group sales and regional talking it of all services. our you're Well, the The depends

identify market offerings, dedicated advisory sales they on obviously talking group, they're but If are and they to intelligence executive their purview. the fully incentives other that those opportunities receive the extent about that you're outside of focused

support work -- software-related those And across on the primarily our products and of the and SAP. sale software both they channel those Oracle software the that companies for partners teams focus regions with those then directly and U.S.

Vincent Colicchio

Rob, I don't I if I it. -- missed wasn't sure And

You grow mention had Did you sequentially. SAP GS&BT should said sequentially? Oracle and

Robert Ramirez

was all going X of in our the comment that grow segments strongest QX my being Oracle. with are to Yes,

Vincent Colicchio

the rates to do see time Okay. new more force? sales we'll with QX in And expect you Or better take that? conversion Ted,

Ted Fernandez

Yes, we improve. expect do it to

can the the year, see, and and fact, product. In improved with familiar it you individuals time the throughout as greater the

expect we it throughout yes, QX. would including So year, to the improve

Vincent Colicchio

talk 'XX? don't you intelligence ask you on another to in want know I year Do to expect to question. a the Maybe return related bear made market year. last And investments way you the growth about and investments there's for sales fruit the

Ted Fernandez

Absolutely.

Operator

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

Ted Fernandez

thank for our forward again when catching look up report with everyone Thank you quarter. me earnings Let in quarter participating you. fourth first to the We call. we

Operator

This And call. you. concludes today's thank conference

ahead may at time. You and go this disconnect

The Hackett Group, Inc. (HCKT) 20 Feb 242023 Q4 Earnings call transcript