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, I'm here to answer your questions with 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.thehackergroup.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. 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'll 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 $79.2 million and adjusted earnings per share of $0.47, both exceeding our quarterly guidance. Our results were driven by the overperformance of our SAP segment and the strong performance of our GSBT segment, which continue to see increased revenue growth from our GEN-AI engagements. GenAI revenues have a higher margin than our traditional consulting and implementation revenues and are driven by highly differentiated capabilities of our AI Explorer XPLR platform and our recently acquired ZBrain platform, as well as the Leeway Hertz implementation team. We are seeing clients moving from awareness and education to budgeted projects And we saw that really towards the end of the fourth quarter, and we're also seeing it in the beginning of this quarter. Total GSBT segment revenues, which were up 4%, were partially offset by the weakness in our e-procurement practice. We believe GenAI-enabled transformation is a generational opportunity that will fundamentally change the way companies operate, as well as the way consulting services are sold and delivered. The GenAI platform capabilities of AI Explorer have now been extended with ZBrain's ability to orchestrate and build complex multi-agent workflows, which should allow us to compete strongly in this rapidly growing space. More importantly, what's most differentiating is the power of our combined end-to-end capability. AI explores capability to dynamically ideate and evaluate agentic GenAI solutions with the advanced open-source orchestration capabilities of ZBrain is very unique. This capability allows us to serve clients from ideation to implementation in one fully integrated platform. It also provides a client with a single platform that they can license to fully support their entire AI center of innovation, or as we refer to it, our AICOI. Although Oracle activity continues to be solid, the segment was impacted by the wind-down of one of our large post-go-life engagements. We continue to see strong overall EPM activity resulting from Oracle's reestablishment of their dedicated EPM sales force. Our SAP Solutions segment overperformed for the fourth quarter in a row as it closed several significant value-added reseller transactions which strongly benefited the quarter. This increased reseller activity is directly attributable to our decision to expand our sales force in that group. We are also experiencing increasing demand from a market-leading life sciences services group after several years of tempered spend in the sector. We continue to see GenAI opportunities emerge. We conducted hundreds of meetings with Global 2000 organizations From our introduction of AI Explorer earlier in the year, these demo meetings and conversations have provided us with valuable adoption insight along with the implementation concerns and limitations of our prospects. These initial meetings are now starting to become new GenAI-enabled transformation opportunities that position us to serve our clients strategically and broadly. We also continue to innovate and make powerful improvements to AI Explorer. In fact, we will release a new version 3 during this first quarter. The most important of the enhancements in version 3 is our ability to dynamically simulate an organization's enterprise Gen AI solutions by leveraging Hackett's proprietary IP to identify automation opportunities and related data source requirements at a work step level. This enables us to identify, design, and evaluate meaningful AI use cases and identify the related AI agents required to build these solutions. Given the strategic access and proprietary and expanding platform capabilities of AI Explorer, it was natural for us to extend our AI implementation capabilities to be able to fully develop and implement Gen AI solutions that we were identifying. This is what resulted in our acquisition of Leeway Hertz at the tail end of the third quarter, a highly recognized provider of advanced Gen AI solutions. This acquisition also included a sophisticated Gen AI orchestration platform, Zbrain, which we agreed to contribute into a joint venture with the Leeway Hertz founder. The JVE, which is to be named Zbrain, brings together the AI Explorer and Zbrain software platforms and will focus on licensing the platforms and creating what we believe to be a first of a kind GenAI ideation through implementation software as a service offering. We believe this JV creates an entirely new value creation opportunity for our shareholders that should result from the growth of ARR or annual recurring licensing revenues. It would also allow the JV to have the opportunity to raise capital and achieve standalone valuations due to the GenAI software focus. Our acquisition of Leeway Hertz resulted in accretive revenue growth in the fourth quarter, and what combined with our AI Explorer and GenAI consulting capabilities are expected to have a consequential impact on our 2025 results. There is no doubt that in just one year, our aggressive pivot to become the architects of our client's GenAI journey is being well received and has significant value creation potential for our organization. On the Executive Advisory Fund, 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 our Gen AI, the content infused by the Leeway Hertz acquisition, will be responsive to our clients' strong interest in this area. We experience sequential and year-over-year revenue growth in the fourth quarter, driven by improvement advisory program sales and renewals. We are now working on launching a premium GenAI solutioning advisory program to fully leverage our solutioning innovation and implementation knowledge from our platforms and clients' engagements that will be directly targeted, and the program will be directly targeted to AI leaders, CIOs, and CTOs who require this knowledge. On the balance sheet side, in the near term, you can expect us to use our strong cash flow from operations to continue our stock buyback program rather than just focus on paying down the remaining outstanding balance of our credit facility 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.