The Hackett Group, Inc.

Welcome to the Hackett Group fourth 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. Rob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin.

Good afternoon, everyone, and thank you for joining us to discuss the Hackett Group's fourth quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of the Hackett Group, and myself, Robert Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4.05 p.m. Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data discussed on this call that is not contained in the release on the Investor Relations page of our website. Before we begin, I would like to remind you that in the following comments and in the question and answer session, we will be making statements about expected future results, which may be forward-looking statements for the purposes of the federal securities laws. These statements relate to our current expectations, estimates, and projections and are not a guarantee of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict and which may not be accurate, especially in light of COVID-19. Actual results may vary. These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors that are contained in our SEC filings. At this point, I would like to turn it over to Ted.

Thank you, Rob, and welcome everyone to our fourth quarter earnings call. As we normally do, I will open the call with some overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow, as well as comment on outlook. We will then review our market and strategy-related comments, after which we will open it up to Q&A. Before I move to the quarterly results, let me start by congratulating our associates for our strong 2022 performance. Although the second half of the year was clearly more challenging as the Fed rate increases started to weigh in on our client spending decisions, our revenues before reimbursements were up 4% and our adjusted EPS was $1.50, which strongly exceeded our prior year results when you exclude the tax benefit on the SARS exercise in 2021. Also, to the fourth quarter this afternoon, we reported revenues of $70.1 million and adjusted earnings per share of $0.36, both exceeding our quarterly guidance. Our quarterly results were driven by revenues before reimbursements from our global SBT segment of 3.5% on a reported basis and 5% on a local currency basis. More specifically, our recurring revenue, high margin research advisory, and IPAS offerings grew over 20% in the quarter. Annual contract value growth for these offerings in 2022 was also over 20%. The success and market opportunity for our intellectual property offerings highlights the reasons why we have accelerated our sales and product development investments in this area. The quarter benefited from the growth of our IPaaS revenues as the large contract we signed towards the end of the second quarter continued to ramp. We also continue to be actively engaged in contract and or pilot discussions with several large software and service companies to help them bolster their value selling and value realization efforts. Our results also benefited from the growth of our research advisory business. During the quarter, we launched our first two market intelligence programs and we plan to launch additional programs throughout 2023. These programs allow us to compare the capabilities of software and service providers, which are valuable to our large Hackett benchmarking and consulting end user client base when considering purchasing their capabilities. The programs also allow us to work with the solution providers to strategically support their sales and marketing efforts. We have also added new content and IP to our existing functionally focused executive advisory programs. Improvements in our existing programs, along with new market intelligence programs, the launch of our new member Hackett Connect, along with our aggressive sales hiring, should allow us to continue to grow our higher margin recurring revenues and related annual contract value during 2023. The global SVT segment revenue growth was partially offset by the results of our Oracle solution segment, which was down 12%, and our SAP solution segment, which was flat with prior year. Our Oracle segment was further impacted in the quarter when one of the large implementations closed as we exited the third quarter decided to cancel our agreement after changing CIOs during the quarter. The unfavorable impact from that last project in Q4 was $0.02 to $0.03 and is estimated to be unfavorable by approximately $0.05 net of staff reductions in Q1 of 2023. We have made some key executive additions to the group in the second half of the year and now expect our Oracle group to level off in Q3 of 2023 and return to revenue growth in Q4 of 2023. Our SAP solutions segment leveled off earlier than expected with flat revenues before reimbursements and improved segment profits driven by increased software sales in the fourth quarter. In Q1, we expect the SAP segment revenues to be flat on a year-over-year basis. The investments we have made to fully digitize our IP and the development of our digital platforms, which includes Quantum Leap, our state-of-the-art global benchmarking platform, and our proprietary Hackett digital transformation platform, or DTP, are paying off. These platforms are allowing us to highly differentiate our offerings and also develop new licensing and research relationships with software and service providers across the enterprise. We also expect to launch our Hackett Connect platform in Q2, which will significantly improve our research and IPaaS member clients' ability who availed themselves to all hack at our IP as well as our expertise. On the balance sheet side, our ability to generate strong cash flow from operations has allowed us to increase our dividend, and in December we successfully settled our $120 million Dutch tender offer to acquire over 5 million shares of the company's common stock. The tender offer resulted in the buyback of nearly 4.9 million shares and returned nearly $115 million to our shareholders. This tender offer should be strongly accretive, and when you consider the after-tax impact of the interest expense we will incur and the elimination of over $2 million of our existing dividend, it's even more appealing on a cash basis. As we have discussed on our last few calls, we want to be more aggressive with our balance sheet by expanding our current credit facility fund acquisitions and to buy back stock while continuing to invest in our business. With that said, let me ask Rob to provide details on our operating results, cash flow, and also comment on outlook. I will make additional comments on strategy and market conditions following Rob's comments. Rob? Thank you, Ted.