The Hackett Group, Inc.

Welcome to the Hackett Group first quarter earnings conference call. Your lines have been placed on the 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 first 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, Rob 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 Q&A 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. 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 first 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. This afternoon, we reported total revenues of $77.2 million and revenues before reimbursements of $75.7 million, which is above the high end of our guidance, and adjusted earnings per share of $0.39, which was at the high end of our guidance. Our results were driven by the overperformance of both our Oracle and SAP segments, which were up strongly. Oracle's overperformance is consistent with the momentum that we have experienced since the second quarter of last year. A new important development is the notable increase in the demand that we're experiencing in our historically strong enterprise performance management, or EPM, offerings. Oracle has reemphasized its sales commitment to this area, and we are clear beneficiaries of this strategy. Our SAP solution segment also performed above our expectations as it closed several value-added reseller transactions which strongly benefited the quarter. We have started to see some of the sales investments we made in this segment last year start to pay off. Our global SPT segment was down 3% compared to last year as we've seen economic headwinds continue to result in extended decision-making. This has been particularly noticeable in the e-procurement area. Although the segment has although segment was impacted by market conditions and new GenAI investment considerations, we are experiencing the significant opportunity that comes from the unlimited transformational use cases that GenAI initiatives will offer. More importantly, our recently launched GenAI assessment platform, AI Explorer, and that is XPLR, continues to receive very favorable feedback. AI Explorer uses AI-assisted functionality, which leverages a world-class business process IP and the task automation opportunities of AI to ideate as well as assess the feasibility and financial benefit potential of client-specific use cases. This has led to over 170 client demo meetings with many more scheduled. These meetings have now resulted in a number of new enterprise, or functional domain-specific AI engagements. Although the revenue impact in Q1 from AI Explorer was nominal, we expect these engagements to increase in number and scope throughout the second quarter. These engagements also leverage our rapidly growing use case library, which can be used to establish GenAI roadmaps with related benefit case analysis using our highly recognized benchmark database. The use case library allows us to promote embedded and recently created capabilities of other software and services providers. Our market intelligence programs are playing a significant role in this endeavor. The rapidly emerging GenAI interest is creating an entirely new way to engage clients broadly and strategically. AI Explorer is creating a unique opportunity to expand our performance improvement access to aggressively pivot to become strategic architects of our clients' Gen AI journey. We also continue to invest in growing our IP-based programs. Specifically, we are quickly acknowledging the power of Gen AI thought leadership will have on the value of the research and expert advice we deliver in our executive advisory and market intelligence programs. While our pipeline for these offerings continues to increase, our conversion rates are lower than planned. We believe our move to fully integrate GenAI content we began in April will be responsive to this market shift. We also believe that our ability to launch our app Hackett AI platform later this year that will incorporate our AI Explorer, Hackett IP, and research to support the move to increase GenAI-led content as well as advice. On the balance sheet side, in the short term, you can expect us to use our strong cash flow from operations to continue to pay down our outstanding balance of our credit facility. Longer term, we plan to use our balance sheet to 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?