The Hackett Group, Inc.

Welcome to the Hackett Group Second Quarter Earnings Conference Call. Your lines have been placed on a listen-only mode until the question and answer session. Please be advised, this 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 Second Quarter results. Speaking on the call today and here to answer your questions is Ted Fernandez. Chairman and CEO of the Hackett Group, and myself, Rob Ramirez, CFO. 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 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 are related 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 your SSC filings. At this point, I would like to turn it over to Ted.

Thank you, Rob, and welcome everyone to our second 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 strategy related comments, after which we will open it up to Q&A. This afternoon we reported revenues before reimbursements of 77.6 million in adjusted earnings per share of 38 cents, which were above and at the midpoint end of our quarterly guidance, respectively. Our quarterly results were as expected, but what is most distinguishing about the quarter is the level of breakthrough innovation we continue to develop which are resulting in significant enhancements to our AI Explorer and ZBrain GenAI platforms. We believe our GenAI platform capabilities will attract clients and strategic partners, like the one we announced this afternoon with Salonis, which will accelerate our growth in this increasingly important area. Salonis is the leading provider of process intelligence software, which provides clients with critical operating insight. By teaming with Solonis, we will be able to ingest their process intelligence insight into AI Explorer and Seabrain to help identify, design, and build high ROI agentic AI solutions with unmatched speed, which accelerates value realization. This partnership will allow us to market this valuable joint offering to our vast client bases, creating significant channel expansion opportunities for both companies. This combination of AI plus PI, or process intelligence, will allow customers to quickly move from intention to action and measurable impact, resulting in large Gen AI-enabled transformation initiatives. Our quarterly results were driven by the performance of our GSBT segment, which included the strong revenue growth from our Gen AI-related engagements. Gen AI engagements also favorably impacted our gross margin, as they demand a higher margin than our traditional consultant and implementation revenues, and are driven by the highly differentiated capabilities of our AI Explorer and ZBrain platforms, as well as the related implementation teams. Clients continue to move from awareness to budgeted projects, a trend we expect to continue throughout the year. Total GSBT revenues, which were up 5% in the quarter, were partially offset by the weakness in our one-stream practice, Excluding the one-free practice, our GSBT segment was up 10%. We believe GenAI-enabled transformation 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 capabilities of our soon-to-be-released version 4 of AI Explorer, which leverages our proprietary solution language model, and Hackett Performance IP significantly accelerates the speed in which we can identify and design agentic ag solutions, and with Sebrain, orchestrate and build complex agentic workflows. Another critical distinction of our new version 4 is the way we are able to design the agentic solutions while considering the client-specific enterprise application ecosystem. This allows the client to clearly understand where existing automation ends and where JNI enablement extends and creates meaningful opportunities to improve enterprise performance. This is highly differentiated and allows us to compete strongly in this rapidly growing space. Our capabilities allow us to serve clients enterprise-wide from ideation to implementation in one fully integrated platform. It also provides a client with a single platform which they can license to fully support their entire AI center or innovation, or as we refer to it, the AICOI. We continue to see GenAI-enabled transformation opportunities emerge in most of our engagements as the need for GenAI capability and relevance continues to increase. These engagements also provide us the opportunity to serve clients strategically and broadly. These capabilities are only being further expanded through new strategic alliances, which we expect to continue to pursue, which should also significantly expand our strategic entry points. Our Oracle Solutions Group segment was down, as expected. Although activity continues to be solid, extended client decision-making has continued to make the revenue replacement of a large post-go-live engagement at the end of last year take longer than we planned. This adversely impacted the second quarter and will do so more meaningfully in the third quarter, giving the tough Oracle prior year Q3 comp. As a result of this transition, and given our continued development of Accelerator, our GenAI-assisted technology implementation platform, which allows us to deliver these engagements more efficiently, led to our decision to adjust our headcount to realize the expected GEN-AI productivity benefits. These reductions are addressed in a restructuring reserve, which Rob will discuss in more detail during guidance. Our SIP solution segment was up during the quarter as implementation revenues resulting from increased software sales activity at the end of last year started to ramp. We expect this momentum to continue through the balance of the year. On the executive advisory front, We continue to invest in growing our IP-based programs. We have integrated our Gen AI content into our executive advisory programs. We recently launched a premium Gen AI solutioning advisory program with a nationally recognized AI leader to fully leverage our solutioning innovation and implementation knowledge from our platforms and client engagements. This 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.