The Hackett Group, Inc.

Good evening, and welcome to the Hackett Group first 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 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 4.06 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 SDC filings. At this point, I would like to turn it over to Seth.

Thank you, Rob, and welcome everyone to our first quarter earnings call. As usual, I'll begin with a brief overview, comments on the quarter and the progress we are making in our strategic transition. I will then turn it back over to Rob to comment on detailed operating results, cash flow, as well as outlook. After Rob's remark, I will return with market and strategy commentary, and then we will open the call for Q&A. As I mentioned last quarter, while we do not control short-term market sentiment for software and services or near-term demand velocity, we do control the intrinsic value that we create. our focus remains on building a structurally stronger, more differentiated hacker group, positioned to lead as enterprise AI shifts from experimentation to measurable value realization. Over the past two years, we have made disciplined, systematic investments to build a cohesive and highly differentiated AI foundation. We have now an integrated suite of proprietary AI platforms, including AI Explorer, which include our Hackett Process Intelligence IP, which informs our proprietary solution language model. We also acquired Leeway Hertz, adding an AI engineering depth and agentic orchestration platform named ZBrain. Most recently, we introduced our latest delivery platforms, XT and AIX, which support the delivery of our business transformation and software implementation services. All of these bring critical capabilities to strategic solutions we deliver to clients. With this foundation in place at the beginning of the year, we made our most significant move to date, which was migrating aggressively to an AI platform-enabled sales and delivery model. This shift affects pricing, resourcing, and delivery economics. More importantly, it allows our business and software experts to accelerate and enhance client value adds non-labor-based scale and expands actionable insight into the services we deliver. No one should underestimate the magnitude of this transition. We're not only deploying these capabilities for clients, and we are also using the same technology internally to execute engagements and deliver our services more effectively. While disruptive in the near term, we believe it positions Hackett to lead a fundamental consulting industry transition and create an entirely new category from labor-based services to what industry analysts increasingly describe as service as a product. Our message to the market is straightforward. Enterprises should not simply deploy AI tools. They must fundamentally rethink how work gets done and how it redefines their industries. We are applying this same principle internally to create our own structural competitive advantage. This afternoon, we reported revenues before reimbursements of $68.7 million in adjusted earnings per share of 34 cents, which was at the low end of our quarterly guidance. Our results continue to reflect two realities. Near-term demand pressure driven by macroeconomic uncertainty and elongated client decision cycles primarily due to AI ROI uncertainty. With that said, we believe that the increasing enterprise demand is unquestionable. We also believe our unique IP and platform tech capabilities are also unquestionable. This has driven our accelerated internal transition to AI platform-enabled delivery, providing our organization with a compelling value creation opportunity. Early indications from our platform-enabled strategy are very promising. We have seen productivity improvements and expanding scope on engagements leveraging our platforms. Q1 project margins in our U.S. Strategy and Business Transformation Group increased by approximately 500 basis points through the leverage of our XP and SPLR platforms. However, in Q1, this benefit was offset by lower utilization as we used the quarter to adjust headcount to reflect the realized productivity improvements. With the anticipated SBT growth in revenue in Q2, we expect the gross margin improvement will materialize in Q2 and continue to improve throughout the remainder of the year. In our Oracle segment, we have already seen projected margin increases from the deployment of the Oracle AIX platform in our second quarter margins. We have also experienced strong client and partner response in competitive pursuits, We recently won two large OneStream engagements in industry and markets where we had limited exposure. Brand and delivery capability were important, but it was clear the wins were driven by the differentiated impact of the OneStream AIX platform. As platform adoption scales across our client base throughout the year, we expect sequential improvements in both revenue and margins consistent with the guidance Rob will discuss. Overall, we see Q3 as an inflection point where adjusted EPS should exceed last year's adjusted EPS, and that's assuming flat revenues year-on-year. From a business perspective, we believe this transition can drive revenue growth with higher margins and expand our addressable market by enabling us to help clients and strategic partners architect and implement their emerging enterprise AI transformation plans. While this pivot is disruptive, given the magnitude of the change required, it creates clear focus on the highest value growth opportunities. Our strategy is to develop highly differentiated, AI-enabled capabilities that leverage our globally trusted brand, expertise, and IP. The objective is not only to accelerate delivery, but to materially enhance the value and the scope of our solutions we deliver. A key challenge? and a major market opportunity is ensuring that clients and strategic partners fully understand the importance of capturing, analyzing, and validating their specific business process context. There is limited AI value realization without detailed understanding of the client's real end-to-end process executions, and this must be done at a very detailed level. That is a foundation element of our solution language model as well as AI score. Our message to the market and to the clients is clear. Simply deploying AI tools will not work. You must reimagine how work gets done based on the specific and strategic requirements of your business and industry, and then decide what technology will best support your efforts. Our AI leadership is being defined by our distinct capability to help clients identify, evaluate, design, and deploy high-impact AI solutions using AI Explorer as well as our other platforms. We believe our platform-enabled delivery will create meaningful growth opportunities with attractive margins while helping clients capture this transformative opportunity. We also believe channel partners can expand our pipeline by increasing client access. During the quarter, we executed and launched a global go-to-market collaboration with IBM to jointly serve existing and new client pursuits. We have initiated an extensive client prioritization process to identify the most meaningful client opportunities. Additionally, we recently collaborated on a new client pursuit, which defines the framework for similar new pursuits. Although we expect limited impact from this partnership in Q2, we believe the prospects to work together provide significant market opportunities as our joint efforts scale. We also continue to believe we can bring significant value to organizations that use process mining software, including Solonis. Our ability to ingest process execution data into AI Explorer improves and accelerates ideation and solution design, helping clients move faster on transformation initiatives. Our recent campaign to process mining users has resulted in a very strong response to our marketing offer to avail themselves to AI Spore. On the balance sheet, we expect to continue generating strong cash flow from operations, supporting our dividend and share repurchase program. With that, let me ask Rob to provide details on our operating results, cash flow, In outlook, I will return with additional strategy and market commentary following Rob's remarks. Rob?