Q4 2023 The Hackett Group Inc Earnings Call
Operator: Please continue to stand by for today's conference. The call will begin momentarily. Thank you. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 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 continue to standby for today's conference call will begin momentarily. Thank you.
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Operator: Please be advised that 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.
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Roberto A. Ramirez: Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss the Hackett Group's fourth quarter 2023 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 4.05 p.m. Eastern.
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Roberto A. Ramirez: 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 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 may not be accurate.
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.
Thank you operator, good afternoon, everyone and thank you for joining us to discuss the Hackett group's fourth quarter 2023 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 405 P M Eastern time.
For a copy of the release please visit our website at www dot the Hackett to Dot com.
Roberto A. Ramirez: 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 SSC filing. At this point, I would like to turn it over to Ted.
We're also place any additional financial or statistical data discussed on this call. That's not contained in the release on the Investor Relations page 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.
Ted A. Fernandez: Thank you, Rob, and welcome, everyone, to our fourth quarter earnings call. As we normally do, I will open the call with some overview comments on the quarter, and I will then turn it back over to Rob to comment on.
These statements relate to our current expectations estimates and projections and are not a guarantee of future performance.
Ted A. Fernandez: Operating Results, Cash Flow, as well as Commonwealth. We will then review our market and strategy-related comments, after which we will open it up for Q&A. This afternoon, we recorded total revenues of $72.4 million and revenues before reimbursement of $71.2 million, which was above the high end of our guidance and adjusted earnings per share of $0.39, which was also above the high end of our guidance. Our results were driven by the performance of our Oracle Solutions segment, which was up strongly. This is consistent with the momentum that we have experienced in that segment since the second quarter.
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 would like to turn it over to Ted.
Thank you, Brian 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.
Detailed operating results cash flow as well.
We will then review our market strategy related comments.
After which we will open it up for Q&A.
Afternoon, we reported total revenues of $72 $4 million of DSP for reimbursement of $71 $2 million, which was above the high end of our guidance and adjusted earnings per share of <unk> 30.
Ted A. Fernandez: A new and important development for the segment is the notable increase in demand that we're experiencing in our historically strong enterprise performance management offering. Our global SBT segment was up when compared to last year. Although the segment was impacted by market conditions, we continue to see an increased interest in Gen AI initiatives. More importantly, our recently launched Gen AI assessment platform, AI Explore, is receiving favorable feedback.
Which was also above the high end of our guidance. Our results were driven by the performance of a horrible solutions segment, which was up strong. This is consistent with the momentum that we've got experience in that segment.
The second quarter.
An important development for the segment is a notable increase in demand that we're experiencing in our historically strong enterprise performance management offering.
Our global SPC segment was up when compared to last year. All of the segment was impacted by market conditions. We could continue to see increased interest in gen. Eight initiatives more importantly, our recently launched <unk>.
Ted A. Fernandez: It has led to a significant number of new client meetings, enabling us to showcase our unique ability to assess, readiness, and identify organizational transformation opportunities. We are leveraging our rapidly growing use case repository to establish Gen-AI roadmaps with related benefit case analysis using our highly recognized benchmark data. The rapidly emerging interest in Gen AI is creating an entirely new way to engage clients broadly and strategically. AI Explorer is creating a unique opportunity for us to expand our trusted performance improvement access to become strategic architects of our clients' Gen AI journey. Our SAP Solutions segment continued its solid performance but was down on a year-over-year basis as the sales investments we made during the year did not start to generate revenues until the end of the year. However, this should benefit the first half of 2024.
Assessment platform AI explore is receiving favorable feedback.
That's led to a significant number of new client base, enabling us to showcase our unique ability to us that readiness and identify organizational transformation opportunities.
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We are leveraging our rapidly growing use case repository to establish Jenny I roadmaps with related benefit case Obsess best case analysis, using our highly recognized benchmark data.
The rapidly emerging Jenny I interest is creating an entirely new way to engage clients broadly at strategically.
I explore is creating a unique opportunity to expand our trusted performance improvement access to become strategic architects of our clients jet AI journey.
Our SAP solutions segment continued its solid performance, but was down on a year over year basis as the sales investments. We made during the year did not start to generate revenues until the end of the year. However, this should benefit the first half of 2024.
Ted A. Fernandez: We also continue to aggressively invest in growing our IP-based programs. We are enhancing the product architecture and pricing of our existing executive advisory programs, resulting in a more powerful combination of highly focused IP and access to expert practitioners, emphasizing our advisor expertise and applied knowledge research. All of our executive advisory programs are now delivered through our new member platform, Hackett Connect, which fully launched in October.
We also continued to aggressively invest in our growing.
Growing our IP based programs, we are enhancing the product architecture and pricing of our existing executive advisory programs, resulting in a more powerful combination of highly focused IP and access to expert practitioners, emphasizing our advisor expertise and applied knowledge.
Research.
All of our executive advisory programs are now delivered through our new member platform packet connect which fully launched in October.
Ted A. Fernandez: This new, state-of-the-art platform allows all of our existing and new members to avail themselves of our experts, research, benchmarking metrics, as well as our best practices IP. However, while our pipeline for these offerings continues to increase, our conversion rates were lower than what we expected during the year. We believe the lower conversion rates were primarily due to the large number of new hires during the year and their lack of familiarity with our offerings in 2023.
This new state of the art platform allows all of our existing and new members to avail themselves to our experts research benchmarking metrics as well as our best practices IP.
While our pipeline for these offerings continues to increase our conversion rates were lower than what we expected during the year. We believe the lower conversion rates were primarily due to the large number of new hires during the year and their lack of familiarity with our offerings.
Ted A. Fernandez: Annual contract value grew 2%, but we expect all of the foundational work we did in 2023 to lead to increasing growth in 2024. On the balance sheet side, in the short term, you can expect us to use our strong cash flow from operations to continue to pay down the outstanding balance of our credit facility. Longer term, we plan to use our balance sheet by using our current credit facility to fund acquisitions and to buy back stock while continuing to invest in our business.
In 2023 annual contract value grew 2%, but we expect all of the foundational work. We did in 2023 to lead to increase in growth in 2024.
On the balance sheet side in the short term you can expect us to use our strong cash flow from operations to continue to pay down.
Our outstanding balance of our credit facility longer term, we plan to use our balance sheet by using 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 com.
Roberto A. Ramirez: With that said, let me ask Rob to provide details on our operating results, cash flow, and also comment on the outlook. I will make additional comments on strategy and market conditions following Rob's comments.
Our outlook I will make additional comments on strategy and market conditions following rob's comments Rob.
Roberto A. Ramirez: Thank you, Ted. As I typically do, I'll cover the following topics during this portion of the call. I'll cover an overview of our 2023 fourth-quarter results, along with an overview of related key operating statistics. I'll also cover an overview of our cash flow activities in the quarter, and I'll conclude with a discussion of our financial outlook for the first quarter of 2024. For purposes of this call, I will comment separately on the revenues of our Global SABT Segment, our Oracle Solutions Segment, our SAP Solutions Segment, and the total company. Our global SMET segment includes the results of our North America and International I-PASS and Benchmark offerings, our Executive Advisory Programs, our Business Transformation, and our One-Stream and Clip-Off. Our Oracle solutions and our SAP solution segments include the results of our Oracle and SAP offerings, respectively. Please note that we will be referencing both total revenues and revenues before reimbursements in our discussion. Reimbursable expenses are primarily project and travel-related expenses passed through to our clients that have no associated impact on our profitability.
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As I typically do I'll cover the following topics. During this portion of the call I'll cover an overview of our 2023 fourth quarter results along with an overview of related key operating statistics.
I'll also cover an overview of our cash flow activities during the quarter and I'll conclude with a discussion of our financial outlook for the first quarter of 2024.
For purposes of this call I will comment separately regarding the revenues of our global SMB to segment.
Our Oracle solutions segment.
Our SAP solutions segment and the total company.
Our global SMB to segment includes the results of our North America, and international Ipass and benchmark offerings, our executive advisory programs, our business transformation and our one stream and coupon offerings.
Our Oracle solution and our SAP solutions segments include the results of our Oracle ERP offerings, respectively.
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 through to our clients that have no associated impact to our profitability.
Roberto A. Ramirez: In our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors. We have 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 discussion from this call on the investor relations page of the company's website. For the fourth quarter of 2023, as Ted mentioned, our total revenue was $72.4 million, up 3% over the prior year. Our revenues before reimbursements were $71.2 million, which was also above the high end of our quarterly guidance, up 3% over the prior year. The fourth quarter reimbursable expense ratio on revenues before reimbursements was 1.7% as compared to 1.6% in the prior quarter and 1.9% when compared to the same period in the prior year.
On our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors we.
We have 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 for this call to the Investor Relations page of the company's website.
For the fourth quarter of 2023.
I had mentioned our total revenue was $72 4 million up 3% over the prior year.
Our revenues before reimbursements were $71 2 million, which was also above the high end of our quarterly guidance up 3% over the prior year.
The fourth quarter Reimbursable expense ratio on revenues before reimbursements was one 7%.
Appeared to one 6% in the prior quarter and one 9% when compared to the same period in the prior year.
Roberto A. Ramirez: Total revenues from our global SMBT segment were $42.2 million for the fourth quarter of 2023. Revenues before reimbursements for our global SMT segment were $41.6 million for the fourth quarter of 2023, an increase of 3% when compared to the same period in the prior year. Total revenues from our Oracle Solutions segment were $19 million for the fourth quarter of 2023.
Total revenues from our global SMB segment were $42 2 million for the fourth quarter of 2023.
Revenues before reimbursements for our global extremities segment were $41 6 million for the fourth quarter up 23, an increase of 3% when compared to the same period in the prior year.
Total revenues from our Oracle solution segment were 19 million for the fourth quarter of 2023.
Roberto A. Ramirez: Revenues before reimbursements for our Oracle Solutions segment were $18.4 million for the fourth quarter, an increase of 10.6% when compared to the same period in the prior year. This is consistent with the momentum we've experienced since the second quarter of 23, with strong double-digit growth over the last two quarters when compared to the prior year periods. Total revenues from our SAP solution segment were $11.2 million for the fourth quarter of 2023. However, revenues before reimbursements for our SAP solution segment were $11.1 million for the fourth quarter, a decrease of 5% when compared to the same period in the prior year, consistent with the guidance we provided last quarter.
Revenues before reimbursements for oral solution segment were $18 4 million for the fourth quarter, an increase of 10, 6% when compared to the same period of the prior year.
This is consistent with the momentum we've experienced since the second quarter of twenty-three with strong double digit growth over the last two quarters when compared to prior year periods.
Total revenues from our safety solutions segment were $11 2 million for the fourth quarter of 'twenty three.
Revenues before reimbursements for SMT solutions segment were $11 1 million for the fourth quarter, a decrease of 5% when compared to the same period in the prior year consistent with the guidance, we provided last quarter.
Roberto A. Ramirez: The sales investments we made during the 23rd quarter are expected to contribute to growth in 2024. Additionally, approximately 24% of our total company revenues before reimbursements consist of recurring, multi-year, and subscription-based revenues, which includes our executive advisory, IP as a service, multi-year benchmarks, and application-managed services contracts. Total company adjusted cost of sales, which excludes reimbursable expenses and non-cash stock-based compensation expense, totaled $40.3 million, or 56.7% of revenues before reimbursements in the fourth quarter of 2023 as compared to $37.8 million, or 54.9% of revenues before reimbursements in the prior year. Total company consultant headcount was 1,168 at the end of the fourth quarter, compared to 1,177 in the previous quarter Total Company Adjusted Gross Margin on revenues Before Reimbursements, which excludes reimbursable expenses and non-cash stock-based compensation expenses, was 43.3% in the fourth quarter of 2023, as compared to 45.1% in the prior year period. This decrease is primarily due to increased headcount and lower utilization in the fourth quarter.
Investments, we made during 'twenty three are expected to contribute to growth in 2024.
Approximately 24% of our total company revenues before reimbursements consistent recurring multi year in subscription based revenues, which includes our executive advisory IP as a service multi year benchmarks and application managed services contracts.
Total company adjusted cost of sales, which exclude reimbursable expenses and noncash stock based compensation expense totaled $40 3 million or 56, 7% of revenues before reimbursements in the fourth quarter of 2023 as compared to 37.8.
Million or 54, 9% of revenues before reimbursements in the prior year.
Total company consultant headcount was 1168 at the end of the fourth quarter as compared to total company consultant headcount of 1177 in the previous quarter.
<unk> 1128 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 43, 3% in the fourth quarter of 2023.
As compared to 45, 1% in the prior year period.
This decrease was primarily due to increased head count and lower utilization in the fourth quarter.
Roberto A. Ramirez: Adjusted as GNA, which excludes non-cash stock-based compensation expense and our Gartner legal settlement and related costs, was $15.4 million, or 21.6% of revenue before reimbursements in the fourth quarter of 2023. This is compared to $14.9 million, or 21.7% of revenues before reimbursements in the prior year, a year over year absolute dollar increase, primarily due to incremental investments we're making and dedicated sales resources for executive These investments approximated 1% of revenues in the fourth quarter of 2023. Adjusted EBITDA, which excludes non-cash, stock-based compensation expense and the one-time legal settlement previously mentioned and related costs, was $16.3 million, or 23% of revenues before reimbursements in the fourth quarter of 2023, as compared to $16.9 million, or 24.5% of revenues before reimbursements in the prior year. Gap net income for the fourth quarter of 23 totaled $7.9 million with diluted earnings per share of 28 cents, compared to gap in that income of $9.7 million or diluted earnings per share of $0.31 in the fourth quarter of the previous year.
Adjusted SG&A, which excludes noncash stock based compensation expense and our Gartner legal settlement and related costs.
It was $15 4 million or 21, 6% of revenues before reimbursements in the fourth quarter of 'twenty three.
This is compared to $14 9 million or 21, 7% of revenues before reimbursements in the prior year.
Your over year absolute dollar increase is primarily due to incremental investments, we're making and dedicated selling resources for our executive advisory service offerings.
These investments are approximated one set in the fourth quarter of 2023.
Adjusted EBITDA, which excludes noncash stock based compensation expense and the one time legal settlement previously mentioned and related costs.
It was $16 3 million or 23% of revenues before reimbursements in the fourth quarter of 'twenty, three as compared to $16 9 million or 24, 5% of revenues before reimbursements in the prior year.
GAAP net income for the fourth quarter of 'twenty three totaled $7 9 million with diluted earnings per share of 28 cents and compares to GAAP net income of $9 7 million or diluted earnings per share of 31 cents in the fourth quarter of the previous year.
Roberto A. Ramirez: The gap in income includes a one-time legal settlement and related costs of $1.2 million, or $0.03 per diluted earnings per share. Adjusted net income, which excludes non-cash stock-based compensation expense and the legal settlement for the fourth quarter of 2023, totaled $10.8 million, or adjusted diluted net income per common share of $0.39, which was above the high end of our earnings guidance range. This compares to adjusted net income of $11.5 million or adjusted diluted net income per common share of $0.36 in the fourth quarter of the prior year. The company's cash balance was worth $21 million at the end of the fourth quarter of 2023 as compared to $9.9 million at the end of the previous quarter. Net cash provided by operating activities in the quarter was $25.6 million, primarily driven by net income adjusted for non-cash activity and decreases in accounts receivable and related day sales outstanding.
GAAP net income includes a onetime legal settlement and related costs of $1 2 million or three cents per diluted earnings per share.
But just the adjusted net income, which excludes noncash stock based compensation expense and the legal settlement for the fourth quarter of 2023 totaled $10 8 million or adjusted diluted net income per common share of 39 cents, which was above the high end of our earnings guidance range.
This compares to adjusted net income of $11 5 million or adjusted diluted net income per common share 36 cents in the fourth quarter of the prior year.
The company's cash balances were 21 billion at the end of the fourth quarter of 'twenty, three as compared to $9 9 million at the end of the previous quarter.
Net cash provided by operating activities in the quarter was $25 6 million.
Primarily driven by net income adjusted for noncash activity and decreases in accounts receivable and related days sales outstanding.
Roberto A. Ramirez: Our DSO at the end of the quarter was 65 days, as compared to 75 days at the end of the previous quarter and as compared to 63 days at the end of the fourth quarter of 2022. During the quarter, the company paid down $11 million on its credit facility. The balance of the company's total debt outstanding at the end of the fourth quarter was approximately $33 million. Net interest expense for the quarter was $641,000.
Our DSO at the end of the quarter was 65 days as compared to 75 days at the end of the previous quarter and as compared to 63 days at the end of the fourth quarter of 2022.
During the quarter the company paid down $11 million on our credit facility the.
The balance of the company's total debt outstanding at the end of the fourth quarter was approximately $33 million.
Net interest expense for the quarter was 641000.
Roberto A. Ramirez: During the quarter, we repurchased approximately 3,000 shares of the company's stock from employees to satisfy income tax withholding triggered by the vesting of restricted shares for an average of $23.08 per share at a total cost of approximately $71,000. Our remaining stock repurchase authorization at the end of the quarter was $13.9 million. At its most recent meeting, subsequent to the end of the quarter, the company's board of directors declared the first quarterly dividend of $0.11 per share for its shareholders of record on March 22, 2024, to be paid on April 5, 2024. I'm now going to move on to discussing the guidance for the first quarter of 2024. Before I do that, I'd like to remind everyone of the seasonality of our business relative to cost, as we move sequentially from Q4 to Q1.
During the quarter, we repurchased approximately 3000 shares of the company's stock from employees to satisfy income tax withholding triggered by the vesting of restricted stock or restricted shares for an average of $23 eight per share at a total cost of approximately 71000.
Our remaining stock repurchase authorization at the end of the quarter was $13 9 million.
At its most recent meeting subsequent to the ended the quarter. The company's board of directors declared the first quarterly dividend of <unk> <unk> per share for shareholders of record on March 22024 to be paid on April 5th 2024.
I'm now going to move to discussing the guidance for first quarter of 2024.
Before I do that I'd like to remind everyone of the seasonality of our business relative to cost as we move sequentially from Q4 to Q1.
Roberto A. Ramirez: Specifically, consistent with first-quarter guidance provided in previous years, our first-quarter guidance for 2024 will reflect the sequential increase in U.S. payroll-related taxes and the sequential buildup of our vacation requirements. The company estimates total revenue before reimbursements for the first quarter of 2024 to be in the range of $72.5 to $74 million. We expect all three segment revenues before reimbursements to be up when compared to the prior year, with Oracle solutions up strongly. We estimate adjusted diluted net income per common share in the first quarter of 2024 to be in the range of 36 to 39 cents, which assumes a GAAP-effective tax rate on adjusted earnings of 22%. We expect adjusted gross margin on revenues before reversements to be approximately 40.6% to 41.4%. We expect adjusted SG&A and interest expense to be approximately $16.8 million.
Specifically consistent with first quarter guidance provided in previous years.
Our first quarter guidance for 2024.
The sequential increase in U S payroll related taxes, and the sequential buildup of our vacation accruals.
The company estimates total revenue before reimbursements for the first quarter of 2024 to be in the range of $72 $5 million to $74 million.
We expect all three segment revenues before reimbursements to be up when compared to the prior year work or with Oracle solutions up strongly.
We estimate adjusted diluted net income per common share in the first quarter of 2024 to be in the range of 36 to 39 cents, which assumes a GAAP effective tax rate on adjusted earnings of 22%.
We expect adjusted gross margin on revenues before reimbursements to be approximately 46% to 41, 4%.
We expect adjusted SG&A and interest expense to be approximately $16 8 million.
Ted A. Fernandez: We expect first quarter adjusted EBITDA on revenues before reimbursements to be in the range of approximately 20 to 21 percent. Lastly, we expect cash balances, excluding the impact of share buyback activity, to be tempered due to the payment of 2023 performance-related bonuses and the payment of employee income taxable holding triggered by net investing of restricted shares. At this point, I would like to turn it back over to Ted to review our market outlook and our strategic priorities for the coming months.
We expect first quarter, adjusted EBITDA and revenues before reimbursements to be in the range of approximately 20% to 21%.
Lastly, we expect cash balances, excluding the impact of share buyback activity to be tempered due to the payment of 2023 performance related bonuses. The payment of employee income tax withholding triggered by net vesting of restricted shares.
At this point I would like to turn it back over to Ted to review.
Our market outlook, and our strategic priorities for the coming months.
Ted A. Fernandez: Thank you, Rob. As we look ahead, let me share our thoughts on the near and long-term demand environment and the growth opportunities it offers our organization. Although demand for digital transformation remains strong, it continues to be impacted by extended decision-making as organizations assess competing priorities created by high interest rates and the demand disruption which it is intended to affect. Digital innovation and enterprise cloud applications, analytics, and artificial intelligence, as well as workload automation, are dramatically influencing the way businesses compete to deliver their services. So, what's new?
Thank you Rob as we look forward, let me share our thoughts on the near and long term demand environment and the growth opportunity. It offers all organization.
Although demand for digital transformation remains strong it continues to be impacted by extended decision, making as organizations assess competing priorities created by high interest rates and the demand disruption, which it is intended to affect.
Digital innovation enterprise cloud applications analytics, and artificial intelligence as well as workflow automation are dramatically influencing the way businesses compete and deliver their services.
So what's new.
Ted A. Fernandez: The rapidly emerging attention and demand for Gen-AI. This possibly unlimited potential will drive an entirely new level of digital world-class performance standards, driving all software and services providers to extend the value of their existing offerings. We believe this will result in unprecedented innovation which all organizations will have to consider. On the talent side, competition for experienced executives continues. Overall, we saw turnover continue to moderate and remain low during the quarter, and we expect that trend to continue.
The rapidly emerging attention and demand for Jennie O. It's possibly unlimited potential will drive an entirely new level of digital World class performance standards, driving all software and services providers to extend the value of their exit the offerings.
We believe this will result in an unprecedented innovation, which all organizations will have to consider.
On the talent side competition for experienced executives continues overall, we saw the turnover continue to moderate and remained low during the quarter and we expect that trend to continue longer term, we have transitioned to a hybrid sales and delivery model, which provides us with effective access to our clients and their respective teams.
Ted A. Fernandez: Longer term, we have transitioned to a hybrid sales and delivery model, which provides effective access to our clients and their respective teams. This hybrid model provides our associates with greater personal flexibility to perform their defined responsibilities remotely, which is very valuable to them. This should allow us to attract and retain talent.
This hybrid model provides our associates with greater personal flexibility to perform their defined responsibilities remotely which is very valuable to them.
This should allow us to attract and retain talent.
Ted A. Fernandez: Strategically, we have accelerated our focus on our recurring high-margin IP-related services by increasing the development of new programs and sales and marketing resources dedicated to this area. We also continue to invest in our new Hackett Connect member platform. But what is new is the accelerated focus and investment we are making in our Gen-AI capability. We are utilizing the AI Explorer platform as the vehicle to integrate the Gen-AI impact across all of our offices.
Strategically we have accelerated our focus on our recurring high margin IP related services by increasing the development of new programs and sales and marketing resources dedicated to this area.
We also continue to invest on our new packet connect member platform.
But what is new is the accelerated focus and investments we are making in our gen AI capability.
We are utilizing AI to explore platform as the vehicle to integrate that Jenny I impact across all of our offerings. We have also hired critical data and technology and Tech technology architecture resources to further support our efforts. This will allow us to become critical architect advisors and <unk>.
Ted A. Fernandez: We have also hired critical data and technology architecture resources to further support our efforts. This will allow us to become critical architects, advisors, and consultants on our clients' Gen-AI journeys. Our ability to measure and assess the impact of Gen-AI, utilizing our growing use case repository along with market intelligence about the respective Gen-AI solution providers is a powerful way to help guide our clients through the unlimited opportunities they will have to consider. We see this as an opportunity for our organization to provide an objective business perspective to what has thus far been primarily a technology innovation story. We continue to see strong downstream revenues from our Benchmarking and Executive Advisory clients to our Business Transformation and Cloud Application Consulting businesses. This halo effect has been approximately over 40% for the last several years.
Solvents of our clients jet AI journey, our ability to measure and assess the impact of jet AI utilizing our growing use case repository along with market intelligence about the respective Gen. III solution providers is a powerful way to help guide our clients through the unlimited opportunities.
They will have to consider we see this as an opportunity for our organization.
To provide an objective business perspective to what thus far has been primarily a technology innovation story.
We continue to see strong downstream revenues from our benchmarking and executive advisory clients to our business transformation and cloud application consulting services. This halo effect has been approximately over 40% for the last several years. We believe this will only be expanded by our AI explore offering organizations who rely on.
Ted A. Fernandez: We believe this will only be expanded by our AI Explore offering. Organizations who rely on our assessment, solutioning, and market intelligence platforms are also more likely to utilize our advisory and consulting services. We also continue to publish our market intelligence reports, with the most recent reports focused on finance and accounting outsourcing.
Our assessment solutions and market intelligence platforms are also more likely to utilize our advisory and consulting services. We also continue to publish our market intelligence report with the most recent reports focus on finance and accounting outsourcing.
Ted A. Fernandez: Several dimensions of enterprise performance management and customer to receivables creation. Our unique insight is our ability to measure value realization and provide implementation insight that accelerates a customer's business performance. We will soon publish our research reports on Gen AI and key solution providers, which is important content for AI Explorer and our Executive Advisory Program. Our market intelligence reports represent critical value to providers. The companies learn how they compare to competitors as well as the measurable impact their solutions deliver. Our large benchmarking and consulting and executive advisory customer base can also acquire market intelligence reports to inform software and services purchasing decisions.
Several dimensions of enterprise performance management and customer to receivables creation.
Unique insight as our ability to measure value realization and provides implementation insight that accelerate to accelerate a customer's business performance. We will soon published research reports on jet AI and key solution providers, which is important content for AI explore and our.
<unk> advisory programs, our market intelligence report represent critical value to providers the companies learn how they compare to competitors as well.
The measurable impact their solutions deliver our large benchmarking and consulting and executive advisory customer base can also acquire the market intelligence reports to Infor software and services purchases decision.
Ted A. Fernandez: We are also exploring strategic partnerships that will allow us to sell our IP through new channels. This will allow us to reach beyond our current Global 1000 focus in an efficient manner. We also continue to redefine our global benchmarking leadership through enhancements in QuantumLeap, our digital benchmark software-as-a-service solution, along with our digital transformation platforms. These platforms allow us to deliver more information with significantly less client effort.
We are also exploring strategic partnership that will allow us to sell our IP through new channels. This will allow us to reach beyond our current global 1000 and focus in an efficient manner.
We also continue to redefine our global benchmarking leadership through enhancements in quantum leap, our digital benchmark software as a service solution along with our digital transformation platforms. These platforms allow us to deliver more information with significantly less client effort. It also allows clients to leverage our IP.
Ted A. Fernandez: It also allows clients to leverage our IP to create compelling benefit case assessments, accelerate process flow and software configuration decisions, and track the value realization of transformation initiatives. We believe the integration of these platforms with AI Explorer significantly enhances the value of RIP and fully aligns our perspective on the new digital world-class performance standards that will be achieved due to emerging Gen-AI technology and related use cases. As I mentioned on previous calls, we have a 20-minute demo on the investor relations page of our website that investors can utilize to become more familiar with the capabilities of our QuantumLeap and DTP platforms. We are also adding videos that preview our Hackett Connect and AI Explorer platforms. 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 that scope, scale, or capability that can accelerate our growth.
Create compelling benefits case assessments accelerate process flow and software configuration decisions and track the value realization of transformation initiatives.
We believe the integration of these platforms with AI explore significantly enhances the value of our IP and fully aligned our perspective on the new digital World class performance standards that will be achieved due to emerging jet AI technology and related use cases.
As I've mentioned on previous calls we have a 20 minute demo in the Investor Relations page of our website at investors can utilize that become more familiar with the capabilities of our quantum leap at DTP platforms. We are also adding videos that preview our hackett connect and AI explorer platforms Lastly, even though we bill.
Please 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.
Ted A. Fernandez: As always, let me close by congratulating our associates on our performance and by thanking them for their tireless efforts. I always urge them to stay highly focused on our clients and our people, no matter what challenges they may encounter. Operator. At this time, if you would like to ask a question, please press star 1, and to withdraw your question, please press star 2. One moment, please. George Sutton with Craig Hellam. You may ask your question.
As always let me close by congratulating, our associates, 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 they 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.
Okay.
At this time, if you would like to ask a question. Please press star one and to withdraw your question. Please press star two one moment please.
George Sutton with Craig Hallum, You May ask your question.
Ted A. Fernandez: Ted, I wondered if you could walk through how you take AI Explorer into a company, do some work for them, and then how it extends into your broader offering. I'm particularly compelled by the thought that it's an entirely new way to engage clients, as you said. Can you just walk through exactly how that works? Okay, let me do that.
Thank you Ted I wondered if you could walk through.
How you take AI explore into a company do some work for them and then how it extends into your broader offering them I'm, particularly compelled by the thought that it and it's an entirely new way to engage clients. As you said can you just walk through exactly how that works.
Okay, Let me do that and first let me also comment on the fact that you are correct that this emerging demand.
Ted A. Fernandez: And first, let me also comment on the fact that you are correct, that this emerging demand requires all software and services providers to, I will say, be prominent and active in this channel if they want to have an opportunity to engage clients strategically, which has only got to increase. So this AI Explorer effort for us has been very, very significant, and it's received – we've had, in terms of the number of meetings scheduled and held, and even the level of proposals we've issued to date, all are more significant than any other – I'll call it the new release that we have ever launched. But with that said, it's a – we take our business process taxonomy. We evaluated cradle-to-grave, as you know, for all of our benchmarking and digital transformation for SAP. We looked at the enterprise across over 100 processes; we aligned those processes and compared the individual functions and activities against the Gen AI technologies which are emerging.
It requires all software and services providers.
I will say be prominent and active in this channel that they want to have an opportunity to engage clients strategically which is only going to increase so this AI explore.
Effort for US has been very very significant and its received we've had in terms of number of meetings scheduled held and even the level of proposals. We've issued to date all are more significant than any other I'll call. It new release that we have ever.
Launched but with that said.
It's it's a we take our business process taxonomy, we evaluated cradle to grave.
For all of our benchmarking and digital transformation IP, we looked at the enterprise across over 100 processes, we align those processes and compare and and compare the individual functions and activities against the Gen AI technologies, which are emerging.
Ted A. Fernandez: So you look at the fact that if you're building a large language model, leveraging machine learning, leveraging neural networks, leveraging a chatbot or digital assistant in some combination or strategic way, how does that impact both functions and activities? We've been doing this review for more than six months. We've identified hundreds of use cases.
So you look at the fact that if you're building a large language model leveraging machine learning leveraging neural networks.
Leveraging a chat bot for digital assistant in some combination of our strategic way how does that impact.
Our functions and activities we've been we've been doing this.
<unk> for more than six months, we've identified hundreds of use cases, so it's allowed us to one evaluate functions and activities for the level of jet AI. If we wanted to call impact. We then compare that that that opportunity for our clients against the client's actual cost.
Ted A. Fernandez: So it's allowed us to, one, evaluate functions and activities for the level of Gen AI, if we wanted to call it impact. We then compare that opportunity for a client against the client's actual cost, time, and service levels that they're achieving. It allows us again to use that measurement capability that exists in QuantumLeap to not only tell the client which activities we believe will drive the highest value, but we can compare that value to the numbers that they're currently incurring so that it results in a benefit case.
Time service levels that they are achieving it allows us again to use dot measurement capability that exists in quantum leap to not only tell the client which activities. We believe will drive the highest value we can compare that value to the numbers that they are currently incurring so that it results in a benefit case, we can do.
Ted A. Fernandez: We can do that; we can then also use our growing use case repository to prioritize these opportunities for clients, again, at a functional, bi-functional group throughout the enterprise, and then help the client then establish priorities. Or, a client can decide that it wants to simply walk away, what we would be calling workforce productivity or an incremental impact. A client can be more aggressive and look at something more transformative, or they can be highly ambitious and do something that would be very breakthrough. But, as everyone is finding out, the investments required to actually achieve some of the breakthrough performance require data harmonization that will support these large language models in order for them to have the intended impact.
That.
We can then also use our growing use case repository.
Sure.
Prioritize these opportunities for clients again at a functional.
By functional group how throughout the enterprise and then helped the client then establish priorities a client can decide that it wants to simply walk, but we would be calling our workforce productivity or an incremental impact.
It could client can be more aggressive and look at something more transformative or the client can be highly ambitious and do something that would be very breakthrough.
But as everyone is finding out.
The investments required to actually achieve some of the breakthrough performance required data harmonization that will support these large language models in order for them to have the intended impact. So we see the clients deciding how they want to start.
Ted A. Fernandez: So we see clients deciding how they want to start. But at the same time, clients that are very serious about this are really looking at their data standards and harmonization of data efforts that will allow them to position the breakthrough innovation that Gen AI will offer. So what I like the most about it, since we've been in front of clients and now over the last week in proposal scenarios with other providers, is that we see the story really being framed from a technology perspective. And we believe that most clients are looking for somebody to bring a business perspective, how to prioritize, what's the impact, what's the organizational impact, all of the things that we do very strongly.
But at the same time clients that are very serious about this are really looking at their data standards and harmonization of data efforts that will allow them to position. The most breakthrough innovation that journey I will offer so what I like the most about it since we've been in front of clients and now over the last week in front of us.
And proposal scenarios with other providers.
Is that we see the story really being trained from a technology perspective.
And we believe that most of the clients are looking for somebody to bring a business perspective.
How to prioritize what's the impact what's the organizational impacts all of the things that we do very strongly so for us it's been a rapid if you wanted to move to take all of our IP benchmarking assets quantum leap in DTP as well as the <unk>.
Ted A. Fernandez: So for us, it's been a rapid, if you want it, move to take all of our IP, benchmarking assets, Quantum Leap and DTP, as well as the research that people can now avail themselves of through Hackett Connect and make sure that they're being enveloped by this new GI innovation and activity that the clients must consider. We think it is a significant effort. It will be a significant effort for us throughout the year. But boy, I think we're pretty happy that we launched Explorer before the end of the year.
Research that people can now avail themselves to Hackett connect and make sure that theyre being envelope by this new J I innovation in activity that the clients must consider.
We take it as it is a significant effort it will be a significant effort for us throughout the year.
Oh Boy I think we're pretty happy that we launched explore before the end of the year and the activity that we've seen since the beginning of the year has been very promising.
Ted A. Fernandez: And the activity that we've seen since the beginning of the year has been very promising. Thank you. That's very helpful detail.
Thank you that's very helpful detail, so I wondered on the market intelligence side.
Ted A. Fernandez: So I wondered on the market intelligence side, how much that has, and there wasn't a lot of discussion on market intelligence on this call, or at least in the prepared comments. I'm curious how much impact this Gartner issue has caused from that perspective. If any, could you just walk through that for us? None.
How much has that there wasn't a lot of discussion on market intelligence on this call or at least the prepared comments I'm curious how much impact this gardner.
Issue has caused from that perspective, if any could you just walk through that for us.
None of the.
Ted A. Fernandez: The Gartner issue, as you referred to it, was a recruiting-related issue where individuals that we hired, a very important one, the head of sales individual, had a non-compete agreement, which was enforced in Connecticut. So we took them out of any direct, sales-related activity that would compete with Gartner, and he will be precluded from returning to his head of global executive advisory sales until November 6th, which is when his one-year period ends. We were very fortunate.
The Gartner issue as you referred to it was a I would call it.
Recruiting related.
There are individuals that.
We hired a very important one.
Sales individual.
<unk> had a noncompete agreement, which was enforced in Connecticut. So we took them out of any direct.
Sales.
Related activity that would compete with Gartner and he will be precluded from returning to us.
Head of global Executive Advisory sales until.
November six with which is when that is one year period.
And we were very fortunate we were hiring a second leader.
Ted A. Fernandez: We were hiring a second leader to support some of our other renewals and customer service issues, a very talented individual who replaced this individual two weeks after we got that notice from the court that they believed that their position was enforceable. We made that transition. We think we've addressed that about as smoothly as we can, and Dogg. As I said in my prepared comments... It may have disrupted or impacted, right, to have the leader not be here at the end of the year leading the team. But I refer to the interim head as a little bit of a Brock Purdy, no flash, just great execution, and we're delighted to have him on board.
To support some of our other renewals and customer service issues.
Very talented individuals.
Which.
It replaces individuals' two weeks after we got that notice.
From the court.
They believe that the.
Their position was enforceable, we made that transition.
We bought we've addressed that about a smoothly as we can and.
And.
As I said.
In my prepared comments.
It may have disrupted or impacted right that the leader.
Not be here at the end of the year I will lead the team.
I I referred to the <unk>.
The interim head is a little bit of a block party.
No flash just great execution, and we're delighted to have him onboard therefore.
Ted A. Fernandez: Therefore, we're looking forward to the investments we make in Impact 23 to Impact 24, but it had no impact on our development of market intelligence reports and how we intend to use them to support our executive advisory programs and now it has become a critical part of AI Explorer because a lot of the AI Explorer questions are not only "what's my opportunity, how do I prioritize?", but they also want a perspective of which vendors do what well, and therefore, who they should Gotcha, so he can't come back until November 6th, so make sure he gets out and votes the next day, November 7th. Thanks guys. He'll be, he's ready to go, don't worry; we'll keep him busy with things that do not conflict with his agreement. Thank you. And once again, if you would like to ask a question, please press star one. Our next caller is Jeff Martin with Roth MKM. You may go ahead. Thanks. Good afternoon, guys.
We're looking forward to the investments we make in 'twenty three.
Impact 'twenty four but it had no impact on our development of market intelligence reports and how we intend to use them to support our executive advisory programs and now becomes a critical part of AI explore because a lot of the AI explore questions are not only what's my opportunity.
How do I prioritize, but they also want a perspective of which vendors do one well and therefore, who they should consider and I believe that they will rely on us.
And on that market intelligence intelligence element of our business to support Gen AI initiatives.
Got you so it can't come back till November six make sure. It gets done what's the next day on November 7th.
Yes.
He is ready to go so we'll keep her busy and thinks that did not conflict.
With this agreement.
Yeah.
Thank you and once again, if you would like to ask a question. Please press star one our next caller is Jeff Martin with Roth <unk> you May go ahead Sir.
Thanks, Good afternoon guys.
Ted A. Fernandez: Ted, I wondered if you could elaborate on what you see as a growth acceleration in 2024. Maybe you could first touch on the sources of that. Is it getting more seasoned salespeople, having them become more seasoned in their conversion rates going up? Is it new offerings? Is it a combination? In detail, that would be helpful.
Ted I wondered if you could elaborate on what you see as a growth acceleration in 2024.
Maybe first touch on the sources of that is it getting more seasoned.
Yeah salespeople.
Not having having them become more seasoned in their quote conversion rates go up is it newer offering in combination with <unk>.
That would be helpful.
Ted A. Fernandez: Yes, I mean, all of the above. Obviously, time and great help. During the year, we were also changing and improving some of the programs, so they were not only becoming familiar with our relative strengths and how to take those to market, but we were obviously even rolling out some enhancements, which included the October rollout of Hackett Connect. So again, a tremendous amount of work and investment that we made. So even with some disruption, listen, it should not prevent us from growing those services the way we originally intended. Back to market intelligence a little bit, if we could, are you seeing much revenue impact from the programs and when you published the first couple of them, you know, towards the middle or even in the fall of last year? It sounds like you published another one or two cents and have kind of a cadence of one or two a quarter plans for the foreseeable future. No, we projected, as you know, very low revenue since we knew these programs would be rolling out the latter part of the year. So the answer is no.
Yes, I mean, all of the above obviously timing great health.
During the year, we were also changing and improving some of the programs. So they were not only becoming familiar with our relative strengths and how to take those to market, but we were obviously, even rolling out some enhancements which included the <unk>.
November October rollout of Hackett connect so again tremendous amount of work and investment that we made so even with some disruption.
Listen it should not prevent us from growing that those services the way we originally intended.
Yes.
Great and then back to market intelligence, a little bit if I could what are you seeing with revenue impart from the programs.
The first couple of them.
Towards the middle or even in the fall of last year. It sounded like you published another one or two cents in there kind of a cadence of one or two.
What are your plans for the foreseeable future.
No we projected as you know very low revenue since we need these programs would be rolling out in the latter part of the year. So.
Ted A. Fernandez: But again, we expect them to contribute to our growth in 2020. Okay, and then could you care to quantify growth acceleration in 2024? How should we think about the model?
The answer is no but.
We expect them to contribute to our growth in 2024.
Okay and then.
You care to quantify growth acceleration in 'twenty to 'twenty four how should we think about.
Ted A. Fernandez: I know typically you target 5% revenue growth and 10%, you know, performing APS growth. Is that? How should we think about this year? Or should we think about acceleration when the back half is perhaps stronger? Well, as you know, we will provide quarterly guidance. We'll set the same. We know that at 5% growth, we obviously generate profits in excess of 10%. If we grow anywhere near 10%, we're at 20% bottom-line contribution. We'll provide our quarterly guidance and allow that to play out, and we'll update that for you every quarter as we go through, as we normally do. So no, if you're asking me to provide annual guidance, Jeff, no, I'm not prepared to change my discipline. Fair enough, thank you.
The model I know typically you target a 5% revenue 10% pro forma.
EPS growth is that.
How we should think about this year or should we think about acceleration over the back half is perhaps stronger than that.
Well as you know we will provide quarterly guidance, we will set the same we know that.
At 5% growth, we obviously generate profits in excess in excess of 10%, if we grow anywhere near 10%, where 20% of Bottomline contribution.
We will provide our quarterly guidance.
And allow that to play out and we'll update that for you every quarter as we go through as we normally do so no.
You're asking me to provide annual guidance Jeff.
I'm not prepared to change by discipline at the moment.
Fair enough. Thank you.
Operator: Thank you. Our next caller is Vincent Colicchio with Barrington Research and the New York Times. Thank you. Thank you.
Thank you our next caller is Vincent Colicchio with Barrington Research.
Yes, so Ted.
Vincent A. Colicchio: Yes, so Ted, I'm curious, the Salesforce, my understanding is bundling of services is one of their focuses. Are you seeing some success there, and if not, do you expect to see some success in that area throughout the year? But it depends on which sales force you're talking about. If it's our regional sales group that supports our SMVT segment and that includes all services, the answer is yes. They carry a bag to support the sale of all services. If you're talking about the executive advisory and market intelligence dedicated sales group, they're fully focused on those offerings, but they obviously receive incentives to the extent that they identify other opportunities that are outside of their purview. And then our software-related teams work directly with those channel partners and those that the software companies support, and they primarily focus on the sale of those software products across the U.S. regions for both Oracle and SAP.
I'm curious the sales force.
My understanding is bundling of services is one of their focuses are you seeing some success there and.
If not do you expect to see some success in that area throughout the year.
Well, it depends which salesforce, you're talking about and Pixar.
Our regional sales group that supports our assets F&B T.
Segment and that includes all services. The answer is yes, they carry a bag to support the sale of all services, if you're talking about the executive advisory and market intelligence dedicated sales group. They they are there they are fully focused on those offerings, but they obviously.
Received incentives to the extent that they identify other opportunities.
That are outside of their purview and then our software related teams work directly with those channel partners and those that the software companies support and they primarily focus on the sale of those software products.
Across the U S regions for both Oracle and SAP.
Ted A. Fernandez: And Rob, I wasn't sure if I missed it, you had said Oracle should grow sequentially. Did you mention GSBT and SAP sequentially? My comment was that all three of our segments are going to grow in Q1, with the strongest being Oracle. Okay, thanks for that. And Ted, do you expect Q1 to see better conversion rates with the new Salesforce? Or will it take more time than that?
And Rob I I don't I wasn't sure if I missed it you had said Oracle should should grow sequentially did you mentioned G SPT in the S&P sequentially.
Sure My comment was that all three of our segments are going to grow in Q1 with the strongest being worked.
Okay, Thanks for that and.
Ted do you expect Q1 to see a better conversion rates with the with the new sales force or will take more time than that.
Ted A. Fernandez: Yes, we do expect it to improve. In fact, it has improved throughout the year. As you can see, the time and grade of the individuals are familiar with the product.
Yes, we do expect that to improve and in fact, it improve throughout the year.
As you can see the time and greater the individuals' im familiar with the product. So yes, we would expect it to improve throughout the year, including Q1.
Ted A. Fernandez: So yes, we would expect it to improve throughout the year, including Q1. And I know you don't want to talk about growth for the year. Maybe there's another way to ask a related question.
And I know you don't want to talk about growth for the year, maybe there's another way to ask a related question do you expect a return on the sales investments you made last year in the market intelligence investments to bear fruit in 'twenty four.
Ted A. Fernandez: Do you expect a return on the sales investments you made last year and the market intelligence investments to bear fruit in 24 months? Absolutely.
Absolutely.
Okay.
Ted A. Fernandez: Thanks, Ted. Thank you, and at this time, I have no further questions. I would now turn the call back over to Mr. Fernandez. Let me thank everyone for participating in our fourth quarter earnings call. We look forward to catching up with you again when we report the first quarter. Thank you. And thank you. This concludes today's conference call. You may go ahead and disconnect at this time.
Thanks Ted.
Okay.
Yeah.
Thank you and at this time I show no further questions I would now turn the call back over to Mr. Fernandez.
Let me thank everyone for participating in our fourth quarter earnings call. We look forward to catching up with you again, when we report the first quarter.
Thank you.
And thank you. This concludes today's conference call. You May go ahead and disconnect at this time.