Q4 2022 Hackett Group Inc Earnings Call
So my phone a library welcomed.
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 and here to answer your questions are Ted Fernandez, Chairman and CEO of the Hackett group and myself, Robert mirrors, Chief Financial Officer.
A press announcement was released over the wires at four <unk> P M Eastern time.
For a copy of the release please visit our website at Www Dot the Hackett group Dot com.
We will also place any additional financial or statistical data discussed on this call that is not contingent to release on the Investor Relations page of our website.
Before we begin I would like to remind you that 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, especially in light of COVID-19.
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 Jeff.
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 as well as comment on outlook. We will then review our market strategy related comments after which we will open it up to Q&A.
Before I move to the quarterly results, let me start by congratulating our associates for our strong 2022 performance.
Although the second half of the year was clearly more challenging as the fed rate increases started.
Hey, Dan on our client spending decisions are revenues before reimbursements were up 4% and our adjusted EPS was $1 50.
Which is which strongly exceeded our prior year results. When you exclude the tax benefit on the Sars exercise in 2021.
Welcome to the fourth quarter. This afternoon, we've reported revenues of $70 1 million and adjusted earnings per share of <unk> 36.
Both exceeding our quarterly guidance, our quarterly results were driven by revenues before reimbursements from our global SPT segment of three 5% on a reported basis and 5% on a local currency basis.
More specifically our recurring revenue high margin research advisory and Ipass offerings grew over 20% in the quarter.
Annual contract value growth for these offerings in 2022 was also over 20%.
Success and market opportunity for our intellectual property offerings highlights the reasons why we have accelerated our sales and product development investments in this area.
The quarter benefited from the growth of our Ipass revenues as the large contract was signed towards the end of the second quarter continued to ramp. We also continue to be actively engaged in contract Andrew pilot discussions with several large software and service companies to help them bolster their value selling and value realization efforts.
Our results also benefited from the growth of our research advisory business during the quarter, we launched our first to market intelligence programs and we plan to launch additional programs throughout 2023.
These programs allow us to compare the capabilities of software and service providers, which are valuable to our largest package benchmarking and consulting end user client base when considering purchasing their capabilities.
Programs also allow us to work with the solution providers to strategically support their sales and marketing efforts.
We have also added new content and IP to our existing functionally focused executive advisory programs and improvements in our existing programs.
Along with new market intelligence programs, the launch of our new member Hackett connect along with our aggressive sales hiring hiring should allow us to continue to grow our higher margin recurring revenues and related annual contract value during 2023.
The global SPT segment revenue growth was partially offset by the results of our Oracle solutions segment, which was down 12%.
And our safety solutions segment, which was flat with prior year.
Oracle segment was further impacted in the quarter when one of the large implementations closed as we exited the third quarter decided to cancel our agreement after.
After changing <unk> during the quarter.
The unfavorable impact from that loss project in Q4 was two to three cents and is estimated.
Weighted to be unfavorable by approximately <unk> <unk> net of staff reductions Q1 of 2023.
We have made some key executive additions to the group and the effect in the second half of the year and now expect our Oracle group to level off in Q3 of 2023 and return to revenue growth in Q4 of 2023.
Our solutions are SAP solutions segment leveled off earlier than expected with flat revenues before reimbursements and improved segment profit driven by increased software sales in the fourth quarter. In Q1, we expect the S&P segment revenues to be flat on a year over year basis.
The investments we have made to fully digitize, our IP and the development of our digital platforms, which include quantum leap our state of the art global benchmarking platform and our proprietary Hackett digital transformation platform or DTP.
Paying off these platforms are allowing us to highly differentiate our offerings and also develop new licensing and research relationships with software and service providers across the enterprise. We also expect to launch our Hackett connect platform in Q2, which will significantly improve our research and Ipass member clients ability.
To avail themselves to all Hackett, our IP as well as our expertise.
On the balance sheet side, our ability to generate strong cash flow from operations has allowed us to increase our dividend and in December we successfully settled our $120 million.
Dollar Dutch tender offer to acquire over 5 million shares of the company's common stock that tender offer resulted in the buyback up nearly $4 9 million shares and returned nearly $115 million to our shareholders. This tender offer should be strongly accretive and when you consider the after tax impact.
Of the interest expense, we will incur and the elimination of over $2 million, an existing dividend of our existing dividend, it's even more appealing on a cash basis as.
As we have discussed on our last few calls we want to be more aggressive with our balance sheet by expanding our current credit facility 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.
Thank you Chad.
As I typically do I'll cover the following topics. During this portion of the call I'll go through an overview of our 2022 fourth quarter results along with an overview of related key operating statistics.
I'll cover an overview of our cash flow activities during the quarter and I'll conclude with a discussion on our financial outlook for the first quarter of 2023.
Effective in the third quarter of 2022, the company reorganized its operating and internal reporting structure to better align with its primary market solutions. As a result, I will comment separately regarding the revenues of our global S&P T. Our Oracle solutions group.
Our S&P solutions group and the total company.
Our global SVG group includes the results of our North American International IP as a service offerings. Our research advisory programs and benchmarking services are one stream offerings and our business transformation offerings Okra solutions and RF solutions segments include the results of our Oracle and it should be offerings respectively.
Yeah.
Please note that we will be referencing both total revenues and revenues before reimbursements in our discussion.
Reimbursable expenses are primarily project travel related expenses passed due to our clients that have no associated impact to our profitability.
During our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors. We've included reconciliations of GAAP to non-GAAP financial measures in our press release filed earlier today and will post any additional information based on the discussions on this call on the Investor Relations page.
Of the company's web site.
For the fourth quarter of 2022, our total revenue.
<unk> was $71 million or.
Our revenues before reimbursements were $68 8 million, which was above the high end of our quarterly guidance.
The Q4 'twenty to Reimbursable expense ratio on revenues before reimbursements was one 9% as compared to one 5% in the prior quarter.
And <unk>, 7% when compared to the same period in the prior year.
Post Covid, we experienced increased client related travel however, given our transition to a remote delivery model. We do not expect these project related travel expenses to return to pre COVID-19 levels.
Total revenues from our global extremities segment were $49 million.
Revenues before reimbursements for a global SMB to survey were $44 million, an increase of three 5% when compared to the same period in the prior year, but up 5% on a local currency basis utilizing the same foreign currency rates in Q4.
2021.
Global <unk> revenue before reimbursements benefited from strong growth in our recurring research advisory and.
Ipass programs, which grew annualized contract value of over 20% for fiscal year of 2022.
Total revenues from Oracle solutions group were $17 2 million.
Revenues before reimbursements for solutions segment were $16 7 million a decrease of 12% when compared to the same periods of the prior year as we continued to experience extended client decision, making through the quarter.
Additionally, during the quarter and what are the large opportunities that was closed as we exited Q3 was canceled the.
The impact of that decision on a favorably impacted the fourth quarter by approximately 2% to three.
Total revenues from our SAP solutions segment were $12 1 million.
Revenues before reimbursements for SMT solutions segment were $11 7 million essentially flat when compared to the same period in the prior year.
As we've stated previously.
<unk> solutions coming out strong in 2021 results and continues to rebuild its pipeline until the completion of some large S&P engagements <unk> results also benefited from a strong software sales activity during the fourth quarter of 2022.
Approximately 24% of our total company revenues before reimbursements consistent recurring multiyear in subscription based revenues.
Which includes our research advisory IP as a service multiyear benchmarks and application managed services contracts.
Total company adjusted cost of sales, which exclude reimbursable expenses and noncash stock based compensation expense totaled $37 8 million or 54, 9% of revenues before reimbursements in the fourth quarter of 2022 <unk> to $48 million.
58, 5% of revenues before reimbursements in the prior year.
Total company consultant headcount was 1120 at the end of the fourth quarter as compared to total company consultant headcount of 1121, the previous quarter and 1106 at the end of the fourth quarter of the prior year.
Total company adjusted gross margin on revenues before reimbursements, which excludes reimbursable expenses and noncash stock based compensation expense was 45, 1% in the fourth quarter of 2022.
As compared to 41, 5% in the prior year period.
The 360 <unk> three.
360 basis point gross margin improvement was primarily driven by the relative mix of higher margin global SWT, Ipass and research advisory and benchmark revenues.
As well as higher margin software sales during the quarter.
Adjusted SG&A, which excludes noncash stock based compensation expense and intangible asset amortization expense was $14 9 million or 21, 7% of revenues before reimbursements in the fourth quarter of 2022.
As compared to $14 4 million or 26% of revenues before reimbursements in the prior year period.
Adjusted EBITDA was $16 9 million or 24, 5% of revenues before reimbursements in the fourth quarter as compared to $15 4 million or 22% of revenues before reimbursements in the prior year.
GAAP net income for the fourth quarter of 2022 totaled $9 7 million or diluted earnings per share of <unk> 31.
For the fourth quarter of 2022 as compared to GAAP net income of $16 5 million or diluted earnings per share of <unk> 50.
In the fourth quarter of the previous year.
GAAP results for the fourth quarter of the previous year included a $7 7 million or <unk> 23 cents per diluted share tax benefit related to the exercise of $2 9 million outstanding share appreciation rights.
Adjusted net income, which excludes noncash stock based compensation expense and intangible amortization for the fourth quarter of 2022 totaled $11 5 million or adjusted diluted net income per share of 36.
Which is above the high end of our earnings guidance range.
This compares to adjusted net income of $18 4 million or adjusted diluted net income per common share of <unk> 56 in the fourth quarter of the prior year.
Adjusted net income for the prior year as already mentioned included an effective tax benefit of 23 cents per diluted share due to the exercise of outstanding share appreciation rights.
In Q2 of this year, we moved to an actual GAAP effective tax rate for adjusted net income reporting purposes.
For those of you reconciling to the prior year reported results we reported adjusted diluted.
Income per common share of <unk> 33 <unk>.
Excluding this onetime tax benefit.
The company's cash balances were $33 million at the end of the fourth quarter of 2022 as compared to $67 million at the end of the previous quarter.
The sequential decrease in our cash balances was primarily driven by cash utilized in financing activities.
Our tender offer which was completed in the fourth quarter of 2022.
Net cash provided by operating activities in the quarter was $24 8 million, primarily driven by net income adjusted for noncash activity.
Decreases in accounts receivable and increases in accounts payable accrued expenses and contract liabilities.
Our DSO or days sales outstanding at the end of the quarter was 63 days as compared to 66 days at the end of the previous quarter.
As Ted mentioned, we were pleased that during the fourth quarter of 2022, we were able to utilize our strong balance sheet and cash flow to return capital to our shareholders.
The parks, who leveraging our new credit facility, we completed our stock tender offer which resulted in the purchase of $4 9 million shares of the company's stock at a price of $23 50 per share excluding transaction related fees.
The tender offer was funded by borrowings on our credit facility of $60 million and approximately $56 million in cash inclusive of transaction related fees for a total of approximately $160 million.
Our remaining stock repurchase authorization at the end of the quarter was $14 7 million.
Subsequent to the quarter three in the quarter. The company's board of directors declared the first quarterly dividend of <unk> <unk>.
For common share for shareholders of record on March 24th 2023 to be paid on April 7th 2023.
Before I move to guidance for the first quarter I would like to remind everyone of the seasonality of our business relative to cost as we move sequentially from Q4 to Q1.
Specifically consistent with first quarter guidance provided in previous years, our first quarter guidance for 2023 will reflect the sequential increase in U S payer related taxes, and the sequential buildup of our vacation accruals.
The company estimates total revenue before reimbursements for the first quarter of 2023 to be in the range of $69 million to $75 million.
We expect global SMB Chi and Sap's solutions revenue before reimbursements.
To be flat to up on a year over year basis, we expect Oracle solutions to be down over 20% on a year over year basis, primarily due to the loss of a large client of fourth quarter and due to unfavorable macroeconomic conditions.
We estimate adjusted diluted net income per common share in the first quarter of 2023 to be in the range of 35% to 38.
Which assumes an effective tax rate on adjusted earnings in the first quarter of 22%.
As Ted mentioned, the first quarter of 2023 reflect the incremental investment we're making in program development.
And that it can add the dedicated sales resources for benchmarking Ipass executive advisory market intelligence and our other IP as a service offerings. These incremental costs are expected to impact our diluted net income per common share by approximately <unk> <unk> on a year over year basis.
We expect adjusted gross margin and revenues before reimbursements to be approximately 40% to 41%.
We expect SG&A and interest rate interest expense for the first quarter to be approximately $15 7 million.
We expect first quarter, adjusted EBITDA and revenues before reimbursements to be in the range of approximately 20% to 22%.
Lastly, we expect our cash balances excluding of any buyback activity to be tempered due to the payment of 2022 performance related bonuses and the payment of employee income tax withholding triggered by net vesting of restricted shares.
At this point I'd like to turn it back over to Ted to review, our market outlook and strategic priorities for the coming months.
Bob as we look forward, let me share our thoughts on the near and long term demand environment and on the growth opportunity. It offers our organization.
Demand for digital transformation may be impacted by economic headwinds in 2023, but it continues to be a clear strategic priority digital.
Digital innovation and enterprise cloud applications analytics, and artificial intelligence cloud infrastructure and workflow automation are dramatically influencing the way businesses compete and deliver their services.
<unk> transformation is redefining all activities at an accelerated pace, forcing organizations to fundamentally change and adopt these new capabilities to remain competitive with that said digital transformation is being impacted by extended decision, making as organizations assess competing priorities created by the increasing rates in that demand.
Disruption, which is intended to affect.
As I mentioned in my opening comments during the quarter, we experienced a disruption or a meaningful Oracle project as we as we exited the third quarter. We also continue to notice clients reassessing their spending priorities. So volatility has increased however, we also saw other large projects go forward and expand.
We believe clients use the year end planning process to reassess their market risks make head count and spending reductions and rebalanced their spending with productivity and strategic cost reduction efforts, which are also core to our offerings. We believe that clients will be become more comfortable with the headwinds they are experiencing.
And we will see behavior improved throughout the year.
Similar to us many of our clients did not experience a demand disruption until late in Q2 of last year and will be more challenged by the strong year over year comps.
The first half of the year, but multiple face more favorable comps in the second half of the year. If we are correct. This will further support the behavior improvement we expect from the first half to the second half of the year on the talent side competition for experienced executives continues but.
But we saw turnover moderate during the quarter and expect that trend to also continue.
Long term, we have transitioned to a hybrid sales and delivery model, which provides us with effective access to our clients and their respective teams. This hybrid model provides us provides our associates with greater personal flexibility to perform their defined responsibilities remotely which is very valuable to them. This should allow us to retract.
And retain talent that we have struggled to retain in the past because of the demanding historical travel requirements of our industry.
Strategically we are accelerating our focus on recruiting high margin IP related services I'm, sorry, with focus on recurring high margin IP related services by increasing the program development and sales and marketing resources dedicated to this area. Additionally, as I've mentioned, we have continued our investments on our new Hackett.
Remember platform, which we plan to launch over the next several months as I. Previously mentioned, we have launched a series of new market intelligence programs that will assess and highlight the unique capabilities of software and service providers across selected categories.
Our absorb these increased costs, which approximately approximate three <unk>.
Our Q1 guidance, but we believe they will result in incremental high margin recurring revenues, which are very important to our long term value creation strategy. It is also important to note that we continue to see increasing downstream revenues from our benchmarking and research advisory clients through our business transformation and technology consulting services.
This halo effect has been in excess of 40% over the last several years simply put organizations, who rely on our IP research and benchmarking services are also more likely to utilize our consulting services. We are also exploring strategic partnerships that will allow us to syndicate, our IP through new channels.
That will allow us to reach beyond our current global 1000 focus in a very efficient manner. We signed the first of these agreements and expect our new partner to announce and launch the syndication of our IP and content started on April one similar to our other licensing efforts, we expect new recurring high margin revenue.
To slowly build from the from this relationship as new markets and segments are offered our IP.
We also continue to redefine our global benchmarking leadership through enhancements in quantum leap, our digital benchmarking software as a service solution along with our digital transformation platform. These platforms allow us to deliver more information with significantly less effort. It also allows our clients to leverage our IP to create compelling benefit case assessments accelerate process.
Slow and software consider configuration decisions and track the value realization of transformation initiatives over the life of their respective effort.
As I have repeated over the last several quarters. We believe there are no comparable IP led platforms in the market.
As I've mentioned on previous calls we have added a 20 minute demos of our Investor Relations page of our website. So that investors can become more familiar with these capabilities with the capabilities of our platform, we will be updating our demo with our newly launched <unk> platform in the next few months lastly, even though we believe that we have the client base and the offerings to grow our.
Business, we continue to look for acquisitions and alliances that strategically leverage our IP and add scope scale or capability, which can accelerate our growth.
As always let me close by congratulating, our searches on our performance and by thanking them for their tireless efforts and always urge them to stay highly focused on our clients and our people no matter what challenges we may encounter.
Those conclude my comments, let me turn it over to our operator, and let's move onto the Q&A section of our call.
Operator.
Thank you at this time, if you would like to ask a question. Please ensure that your phone is on muted press star one and record your name clearly when prompted.
If you would need to withdraw your question. Please press star two again to ask a question. Please press star one one moment for our first question.
Our first question is from George Sutton with Craig Hallum, You May go ahead.
Thank you Ted I Wonder if you could go into a little more detail on the thought process of the clients, becoming more comfortable with the headwinds that they face.
It sounds like you're anticipating youll get back to sales growth in Q4 and beyond I, just want to kind of walk from Q1.
What we're looking at.
Through the rest of the year and kind of how you see that all playing out.
Well first of all the Q4 referenced is only specific to Oracle, which will be down on a year over year basis. We now expect them through Q3 level off in Q3, and then returned to growth in Q4 as you recall for Oracle and SAP <unk>, we thought that would happen in Q2 of 2023, we've done that we've achieved that.
With SAP, but oracle hit up a pretty nice speed bump with that class client loss in the fourth quarter, which we obviously didn't anticipate at the time with that said look we've got to.
We've got to.
Very strong quarters ahead, Q1, and Q2 as you know, we're a record quarters for us and we exceeded guidance by <unk> <unk> in both quarters, we were.
We're clearly experiencing demand improvement.
And that first half of 'twenty three that we have not experienced before obviously that trend.
Trended down in the last two quarters of 2023 and as I mentioned it wasn't just us because we're really reacting to what our very large clients experience and we started feeling those that second guessing towards the end of the second quarter of last year.
What did we say look we saw that that <unk>.
Volatility like Alcoa's Snake show up for the first time, our latest Q2, we saw an impact of Q3 and in client behavior, but it was really more limited as we got into Q4, we saw clients clearly starting to do planning.
That.
That was unlike what many of them have experienced in the past you've seen many of the large companies, especially on the tech side.
Data with some pretty aggressive head count cuts, we think all of those decisions. We think we're pretty carefully considered as clients. One is the Q4 did to our annual planning and then started launching all of their planned initiatives in the beginning of the quarter. So we see that activity.
For us increased from the beginning of the Q1 towards the second into the second quarter.
We think clients again are launching these initiatives and unless they are disruptive further.
Which.
It remains to be seen but if it's as expected whether or not our rates are increased.
Whether it's one more time or now as many as two or three times as recently as was mentioned today and it impacted the market, but are less and less demand.
Is not disrupted.
Further.
We do expect both the activity and behavior of clients to improve from Q1 to Q2 and then we also expected to improve into Q3 into Q4, both because many of them dealt with many of their ill call. It softness as they exited Q4 and are trying to deal with that in Q1.
And because clearly most of them will see favorable comps in Q3, and Q4 versus the Q1 and Q2. So it's the combination of both what comps they are facing.
Uh huh.
How aggressively they dealt with what they believe was right sizing or resetting spending priorities George that I believe.
Much of it has taken place so should it be modified or will it be modified of course it always is.
But I believe.
23 sets up more like the inverse of <unk> 22, which is a tougher first half of 'twenty three because of both comps and the decisions that many of the companies made a reset spending priorities as they exited 22, and then improved behavior as they go into more favorable comps in the second.
Half of the year.
And if they missed any of their if you want to call it.
Cost reduction or resetting efforts with their Q4 effort that they will have dealt with that.
No later than the end of Q1, so all of that leads leads us to believe that.
Sales.
And our revenue activity and pipeline velocity will improve from the first half to the second half.
One other question if I could this incremental investment that will cause III.
In the first quarter can you just give us a little more detail in terms of what what these investments are in terms of people in terms of content et cetera.
Well the single largest expenditure is that.
We're trying to aggressively increase the sales head count in our IP related businesses.
We started to do that.
Oh, well, let's call it in the second quarter of last year accelerated that into the third and fourth.
And we've continued to increase it.
Into Q1, we have no plans to.
I'll call that turned that off I think we're trying to be smart in the way, we ramped up the resources and the kind of effectiveness that we expect so we've got all of those if you want to call. It governance in place to make sure that we're not.
We're not throw it away or overspending, what we shouldn't.
But look the prospects for us to continue to grow.
Sure.
Research Advisory Ipass offerings, and new market intelligence programs is significant.
We think that the biggest thing that we lack is a world class sales group.
We're adding both senior and entry and mid level people to our team will continue to do that throughout the year.
We have improved the existing.
Executive advisor, which are the functionally focused programs that we had previously put out previously in place added one in 2022 added content and tiers as we enter 2023 into that group.
We've launched two of the market intelligence programs.
We expect to add others throughout all of 2003, and we would expect all of that activity to result in.
While we believe we want to maintain a pretty high level of growth in that group and the annual contract value to come to that group, we think that that significantly changes the valuation.
The I'll call it the valuation opportunities for Hackett, but it also as we've seen.
The Halo effect from.
That improved client that increasing client base since it's been so productive downstream up primarily to the business transformation group, but it's also has extended into the technology side as well.
We hope we can have our cake and eat it too and that is to drive that growth. It comes obviously at higher margins that comes.
On a recurring basis and then.
See if we can then harvest.
And get the kind of Halo effect, we've gotten historically over the last several years from that client base, but do that and then as an it at an increasing basis that we as we add more clients.
And then just to kind of complete the IP I'll call it revenue growth investments.
Look in order for us to syndicate, our IP to this new partner that we'll launch will syndicate will start to syndication of some of our IP in April .
That's taken time and effort.
But we believe these are all things that allow us to become a really valuable.
IP led research advisory into strategic consulting organization.
What we intend to prove.
Gotcha, Okay. Thanks, Ed.
Thank you.
Reminder, if you would like to ask a question. Please press star followed by one hour.
Our next question is from Jeff Martin with Roth M. K M. You May go ahead.
Thanks, Good evening, Ken and Rob Hope you're doing well.
Hey, Jeff Hi, Jeff.
But Ted wanted to get a sense for progression on the IP as a service pilots I know in the past converting pilots to contracts has been yeah.
A matter of holding the line and sticking to your guns in terms of what you think the value creation is.
To Hackett Hackett brings to the table.
Was curious if if you've made.
The progress that you're sufficiently satisfied with or if that continues to be kind of a to be determined situation.
Well the answer is yes first the success of our existing programs.
I believe is becoming increasingly noticeable the focus with software and service providers to find a way to provide a compelling way to sell and demonstrate the value realization that people can get by purchasing their software and services has become seems to be becoming.
More important to the software providers, what we learned from.
The process, we went through in if you want to call. It 21 in the second half of 'twenty two.
One we needed to make sure that our platform to a commercially ready and we've done that I mean, just.
Sure.
Very very well.
We also wanted to make sure that we did not do any pilots that were not being paid.
The activity that we've got today.
As people evaluate scope capability of our offering to them is on a paid basis.
So we think we're creating the right cadence switches to expose.
Companies to our capabilities allow them to see how best they can leverage and understand the power.
And yes, we hope that those pilots that we have launched.
Some of them will turn into meaningful large multiyear agreements like the ones we have in place already.
Okay, and then I wanted to clarify.
On the third quarter call. There was discussion regarding a large transportation company impacting EPS by about <unk> in both the third and fourth quarter I wanted to clarify that.
Separate from the.
Digital transformation project that was canceled and that was supposed to start in Q4 is that correct.
Yes. These are two two by four as we took the head.
One.
In the third quarter.
With a very good an existing client of ours.
But we're an opportunity we lost that opportunity given their priorities.
And their focus when they lose the client.
Separate and apart from that.
And that did have an oracle component, but it also had a.
Business transformation component.
The other was.
A brand new sales if you recall last quarter I mentioned, the fact that as we exited the quarter. We sold several large deals. So we were going into Q4 with a significant amount of momentum into Q4, which would also carry into two one into Q1.
And.
The group that was most impacted by those large transactions was the Oracle group again, even though there was a business transformation piece too.
<unk>.
The first one on not necessarily.
The second one.
And that just.
As we as we said new CIO came in.
Decided he wanted to make a change.
They paid us for the work we have done to date, but.
It impacted.
Some of the revenue we would have recognized in Q4, it clearly impacts Q you wanted a very meaningful way so.
Salesforce setbacks, but they were.
Separate and distinct in fact I E. As we shared with the board ever been wonderful to see what 2022 and the beginning of 2003 would have looked like if we can.
Had those.
Setbacks, but look they happen.
Clients circumstances change some.
Sometimes relationships change and they can impact the work that youre doing and.
We have the ability to absorb those and continue to.
Increased profitability and cash flow of the business and we'll have a chance to demonstrate that over the next few quarters.
Okay, Great and then one more if I could on the Hackett acceleration matrix launch pending in a couple of months here.
What what else does that launch entail and how should we think about the contribution over the medium and long term from from that initiative.
Firstly, there's been some learning as we've come through the first of the first few programs that we're launching.
So the fact is that you will see them. The first one publicized pretty soon with the results.
Second one is well underway in fact, a third one has already already has a group of participants in place and we will continue to try to add Adam throughout 2023.
But if we can get.
But if we can get.
Let's call it.
Uh huh.
Four or five fully launched meaning not just launched actively pursuing participants, but having the results out and then allowing us to market them.
And our end user base as well as the participants.
We have the ability.
To do both the market the boat if we have an opportunity to do that even though they are in different levels by the beginning of the first year.
We should start seeing revenue from those programs accrue in the third and the fourth quarter.
In the meantime, Jeff it's very important to note.
That has we're having all of these sales resources to the team.
They have the ability to sell both.
The existing executive advisory programs, which as I said, we expanded in 'twenty, two and added some additional features and tears too as.
As well as the new market intelligence programs and.
They will also be inserted too.
Identify other about benchmarking of our ipass opportunities, even though the primary.
Focus of the large sales force build is around recurring revenue annualized contract value programs.
We've separated we decided we wanted to have a dedicated group for that as well as making additional investments for the nonrecurring pieces, which could be for example in a transformational benchmark. So.
But we're making we're clearly accelerating the investments in that group and Youll see.
Youll see some.
Some announcements soon as to some of the people that we're bringing on board in that in that group.
Great very helpful and look forward to following the progress there.
Mhm.
Thank you. The next question is from Vince Colicchio with Barrington Research you May go ahead.
Yes, Ted if I'm correct I think your market intelligence program rollout was slower than anticipated.
Is that a resource issue or was there any particular challenge.
Well, it's both we've been adding resources to that product development group.
We were also.
Recruiting participants and getting the feedback back from those first initial programs and yes. So it was a little learning and improvement that happened as part of that but we think its resulting in an <unk> and an exceptional product.
Part of your comments on you know clients have reset.
Their expectations for spending.
And just curious said youre not expecting growth in Oracle and the first half.
First three quarters.
Just curious do you think cancellations and maybe delays are behind us or.
Is it just so tough to predict right now.
I mean, you never really know, but I would say that the events we faced.
Our clearly.
Rare to us I mean, do things happen things clients again change priorities.
The reset of course.
Mike My sense is that clients had a really good chance to look.
And right size and reset priorities and their 2023 planning process and Youre seeing it as they've all announced and reset expectations for their earnings.
It is included reductions in re prioritization of.
Of of initiatives across all industries, we've seen it in and we will continue to see it as people.
Report and move into the beginning of the year.
When I think that that process was as thoughtful that they had a pretty good feel for what the second half of 'twenty two brought on and what they needed to pursue in 2023, when the market was being so clear.
And.
Penalising, those who were not resetting and.
Right sizing on a timely basis.
We think that it's been a pretty good shake out and that we will see clients accelerate their spend.
Throughout Q1 and into Q2 and it will improve in the second half of the year, that's what we believe.
Interest rates interest rate increases may disrupt demand a little bit more but.
Look at the market also continues to say <unk> share of those.
Interest rate increases are in place we know the demand disruption that it's created it's allowed people to I think to try to plan for 'twenty three 2023 properly.
Those who I think.
Those I just can't imagine many that have deferred decisions as Dave.
Reported Q4, and guided Q1 and spoken to their employees.
Thanks for all the color thanks Ted.
Thank you and at this time I show no further questions I will turn the call back over to Mr. Fernandez.
Thank you operator, and let me thank everyone for participating in our fourth quarter earnings call and look forward to updating you again, when we report the first quarter.
And that does conclude today's conference. Thank you all for participating you may disconnect at this time.