The Hackett Group, Inc.

Welcome to the Hackett Group Third 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 Third Quarter results. Speaking on the call today, I'm here to answer your questions for Ted Fernandez, Chairman and Chief Executive Officer of the Hackett Group, and myself, Robert Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4.15 p.m. Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We'll 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. Actual results may vary. These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors contained in our SEC filings. At this point, I'd like to turn it over to Ted.

Thank you, Rob, and welcome, everyone, to our third 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, and guidance. 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 $79.8 million and adjusted earnings per share of 43 cents, both of which exceeded our quarterly guidance. Our Oracle and SAP segments continued their strong performance, but what is new is the emergence and increased revenue growth from our Gen AI engagements which grew strongly on a sequential revenue basis in the quarter. This new GenAI consulting revenue, driven by our AI Explorer, capital XPLR platform, was offset by the weakness in our e-procurement group and resulted in our GSBT segment being flat on a year-over-year basis. We are seeing clients quickly moving from awareness and education about its GenAI adoption opportunity to budgeted projects which we expect to further increase in the fourth quarter and continue throughout 2025. We believe GenAI is a generational opportunity which will fundamentally change the way companies operate as well as the way consulting services are sold and delivered. The GenAI platform capability we have developed in AI Explorer and now expanded with the ZBrain platform, which was part of the Leeway Hertz acquisition, are highly differentiating and should allow us to compete strongly for the emerging growth in this important space. Our Oracle segment performance was consistent with the momentum we have experienced since early 2023 when Oracle reestablished its dedicated sales team in its Enterprise Performance Management, or EPM, offerings. Our SAP Solutions segment performed above expectations for the third quarter in a row as it closed several value-added reseller transactions which benefited the quarter. This increase is directly attributable to our decision last year to expand our sales force and more broadly leverage our market-leading life sciences capability. We continue to see the GenAI opportunities emerge. We have conducted hundreds of meetings with global 1,000 organizations since our introduction of AI Explorer earlier this year. These demo meetings and conversations have provided us with valuable client adoption considerations along with their implementation concerns and limitations. These initial meetings are now becoming new meaningful opportunities for us to serve clients strategically and broadly. We use this unique insight to make powerful improvements to our recent release, AI Explorer Version 2. The most important of the enhancements is our ability to simulate an organization's enterprise use case opportunities by leveraging Hackett IP, including our benchmarking, best practice business processes, and software configuration knowledge to identify AI automation opportunities in data source requirements at the work step or activity level. This enables us to identify, design, and evaluate meaningful AI solutions or use cases including AI agent opportunities using our AI Explorers, GenAI assisted capabilities. We believe that our new Explorer version two capabilities and our acquisition of leeway Hertz already favorably impacting our conversion rates and significantly expanding the downstream revenue opportunities with our clients. Given the strategic access and platform expanding capabilities of AI Explorer, it was natural for us to extend our AI implementation capabilities to fully be able to develop and implement GenAI use cases that we were identifying. This resulted in our acquisition of Leeway Herx, a highly recognized provider of advanced GenAI solutions. The acquisition also included a GenAI orchestration solution, ZBrain, which we agreed to contribute into a newly created joint venture with the Leeway Hertz founder. The JV, which will bring together the AI Explorer and Zbrain software platforms and will focus on licensing the platforms and creating a first of its kind Gen-AI ideation through implementation software as a service offering. We believe this JV creates an entirely new value creation opportunity for our shareholders that could result from the growth of annual recurring revenues. It would also allow us to have the opportunity to raise capital and achieve standalone valuations due to its GenAI software focus. Our pre-acquisition collaboration with Leeway Hertz during the third quarter resulted in strong sequential quarterly GenAI revenue growth, which we expect will continue into the fourth quarter and could have consequential impact on our 2025 results. There is no doubt that in just nine months, our aggressive pivot to become the architects of our clients' GenAI journey is being well received and has significant value creation potential for our organization. We have extended and strengthened our capabilities and continue to add GenAI-enabled transformation engagements driven by AI Explorer. Our unique ability to identify meaningful use cases, determine their feasibility leveraging Hackett IP, which now extend to implementation and platform licensing prospects, is highly differentiated. On the executive advisory front, we continue to invest in growing our IP-based programs. We believe our move to fully integrate Gen AI content, which is now being further augmented by the highly recognized Gen AI content, which was infused by the Leeway Hertz acquisition, will be responsive to our clients' strong interest in this area. We expect our fourth quarter sequential growth, and our advisory program sales and renewals to reflect this impact. On the balance sheet side, as we announced today, in the near term, they can expect us to use our strong cash flow from operations to accelerate our stock buyback program rather than pay down our remaining outstanding balance of our credit facility while continuing to invest in our business. Our $20 million stock back Addition to our existing $11.1 million authorization leaves us with $31.1 million as we start the quarter. With that said, let me ask Rob to provide details on our operating results, cash flow, and also comment on outlook as we will make additional comments on strategy and market conditions following Rob's comments. Rob?