Q4 2024 The Hackett Group Inc Earnings Call
[music]
[music]
Welcome to the Hackett Group 4th Quarter Earnings Conference Call.
Your lines have been placed on a listen-only mode until the question and answer session.
Speaker Change: Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO, and Mr. Rob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin.
Speaker Change: Good afternoon, everyone, and thank you for joining us to discuss the Hacker Group's fourth quarter results. Speaking on the call today, I'm here to answer your questions with Ted Fernandez, Chairman and CEO of the Hacker Group, and myself, Rob Ramirez, Chief Financial Officer.
Speaker Change: A press announcement was released over the wires at 4.05 p.m. Eastern Time. For a copy of the release, please visit our website at www.thehackergroup.com.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Action 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 over to Ted.
Ted Fernandez: Thank you, Rob, and welcome everyone to our fourth quarter earnings call. As we normally do, I'll open the call with some overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow, and guidance.
Ted Fernandez: We will then review our market and strategy-related comments, after which we will open it up to Q&A.
Ted Fernandez: This afternoon, we reported total revenues of $79.2 million and adjusted earnings per share of $0.47, both exceeding our quarterly guidance.
Ted Fernandez: Our results were driven by the overperformance of our SAP segment and the strong performance of our GSVT segment, which continue to see increased revenue growth from our Gen-AI engagements.
Ted Fernandez: JAI revenues have a higher margin than our traditional consulting and implementation revenues.
Ted Fernandez: and are driven by highly differentiated capabilities of our AI Explorer XPLR platform and our recently acquired Zbrain platform, as well as the Leeway Hertz implementation team.
Ted Fernandez: We are seeing clients moving from awareness and education to budgeted projects, and we saw that really towards the end of the fourth quarter, and we're also seeing it in the beginning of this quarter.
Ted Fernandez: Total GSBT segment revenues, which were at 4%, were partially offset by the weakness in our e-procurement practice.
Ted Fernandez: We believe Gen-AI enabled transformation is a generational opportunity that will fundamentally change the way companies operate as well as the way consulting services are sold and delivered.
Ted Fernandez: which should allow us to compete strongly in this rapidly growing space.
Ted Fernandez: More importantly, what's most differentiating is the power of our combined end-to-end capability.
Ted Fernandez: AI Explorer's capability to dynamically ideate and evaluate agentic Gen-AI solutions
Ted Fernandez: with the advanced open source orchestration capabilities of Sebring is very unique. This capability allows us to serve clients from ideation to implementation in one fully integrated platform.
Ted Fernandez: It also provides a client with a single platform that they can license to fully support their entire AI center of innovation, or as we refer to it, our AI COI.
Ted Fernandez: While the oracle activity continues to be solid, the segment was impacted by the wind-down of one of our large post-go-life engagements.
Ted Fernandez: We continue to see strong overall EPM activity resulting from Oracle's reestablishment of their dedicated EPM sales force.
Ted Fernandez: Our SAP Solutions segment overperformed for the fourth quarter in a row as it closed several significant value-added reseller transactions, which strongly benefited the quarter.
Ted Fernandez: This increased reseller activity is directly attributable to our decision to expand our sales force in that group. We are also experiencing increasing demand from a market-leading life sciences services group after several years of tempered spend in the sector.
Ted Fernandez: We conducted hundreds of meetings with global 2,000 organizations from our introduction of AI Explorer earlier in the year. These demo meetings and conversations have provided us with valuable adoption insight along with the implementation concerns and limitations of our prospects.
Ted Fernandez: We also continue to innovate and make powerful improvements to AI Explorer. In fact, we will release a new version 3 during this first quarter. The most important of the enhancements in version 3 is our ability to dynamically simulate an organization's enterprise Gen AI solutions by leveraging Hackett's proprietary IP.
Ted Fernandez: to identify automation opportunities in related data source requirements at a workstep level.
Ted Fernandez: This enables us to identify, design, and evaluate meaningful AI use cases and identify the related AI agents required to build these solutions.
Ted Fernandez: Given the strategic access and proprietary and expanding platform capabilities of AI Explorer, it was natural for us to extend our AI implementation capabilities to be able to fully develop and implement Gen-AI solutions that we were identifying.
Ted Fernandez: This is what resulted in our acquisition of Leeway Hertz at the tail end of the third quarter, a highly recognized provider of advanced GNI solutions.
Ted Fernandez: This acquisition also included a sophisticated Gen-AI orchestration platform, Zbrain, which we agreed to contribute into a joint venture with the Leeway Hertz founder.
Ted Fernandez: The JV, which is to be named ZBrain, brings together the AI Explorer and ZBrain software platforms and will focus on licensing the platforms and creating what we believe to be a first-of-a-kind Gen-AI ideation through implementation software-as-a-service offering.
Ted Fernandez: It would also allow the JV to have the opportunity to raise capital and achieve standalone valuations due to the GenEye software focus.
Ted Fernandez: Our acquisition of Leeway Hertz resulted in accretive revenue growth in the fourth quarter and what combined with our AI Explorer and Gen AI consulting capabilities are expected to have a consequential impact on our 2025 results.
Ted Fernandez: There is no doubt that in just one year, our aggressive pivot to become the architects of our client's Gen-AI journey is being well received and has significant value creation potential for our organization.
Ted Fernandez: On the executive advisory front, we continue to invest and are growing our IP-based programs.
Ted Fernandez: We believe our move to fully integrate Gen-AI content, which is now being further augmented by our Gen-AI, the content infused by the Leeway Hertz acquisition, will be responsive to our clients' strong interest in this area.
Ted Fernandez: We experience sequential and year-over-year revenue growth in the fourth quarter driven by improvement advisory program sales and renewals.
Ted Fernandez: from our platforms and clients and engagements that will be directly targeted and the program will be directly targeted to AI leaders, CIOs, and CTOs who require this knowledge.
Ted Fernandez: On the balance sheet side, in the near term, you can expect us to use our strong cash flow from operations to continue our stock buyback program, rather than just focus on paying down the remaining outstanding balance of our credit facility while continuing to invest in our business.
Ted Fernandez: 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?
Rob Ramirez: Thank you, Ted. As I typically do, I'll cover the following topics during my portion of the call. I'll comment and make a commentary on an overview of our 2024 fourth quarter results, along with an overview of related key operating statistics.
Rob Ramirez: I'll cover an overview of our cash flow activities during the quarter, and I'll then conclude with a discussion on our financial outlook for the first quarter of 2025.
Rob Ramirez: For purposes of this call, I will comment separately regarding the revenues of our Global SMPT Segment, our Oracle Solutions Segment, our SAP Solutions Segment, and the total company.
Rob Ramirez: Our global SMBT segment includes the results of our North America and international Gen-AI consulting and implementation licensing revenues, benchmarking and business transformation offerings, executive advisory and market intelligence, and I-PASS programs, and our one-stream and e-procurement implementation offerings.
Rob Ramirez: Our Oracle solutions and our SAP solution segments include the results of our Oracle and SAP offerings, respectively.
Rob Ramirez: Please note that we will be referencing both total revenues and revenue before reimbursements in our discussion.
Rob Ramirez: Reimbursable expenses are primarily project, travel-related expenses passed through to our clients that have no associated impact on our profitability.
Rob Ramirez: During our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors.
Rob Ramirez: Moving on, for the fourth quarter of 2024, our total revenue was $79.2 million. Our revenues before reimbursements were $77.5 million, which was above the high end of our quarterly guidance.
Rob Ramirez: The fourth quarter of 2024 reimbursable offense ratio on revenues before reimbursements was 2.3%, as compared to 2.3% in the prior quarter and 1.7% in the same period of the prior year.
Rob Ramirez: Total revenues from our global S&BT segment were $43.9 million for the fourth quarter of 2024.
Rob Ramirez: Revenues before reimbursements for our global SMVT segment were $43.2 million for the fourth quarter of 2024, an increase of 4% when compared to the same period in the prior year.
Rob Ramirez: The revenue growth from our GenEye consulting and implementations of the SegWit was primarily offset by weakness in our e-procurement and one-stream implementation offerings.
Rob Ramirez: Total revenues from our Oracle Solutions segment were $18.2 million for the fourth quarter of 2024.
Rob Ramirez: Revenues before reimbursements for our Oracle Solutions segment were $17.4 million for the fourth quarter of 2024, a decrease of 6% when compared to the same period in the prior year.
Rob Ramirez: This decrease is primarily due to the post-go live wind down of a large engagement, which will also impact the Oracle momentum in the first quarter.
Rob Ramirez: Total revenues from our SAP solution segment were $17.2 million for the fourth quarter
Rob Ramirez: Revenues before reimbursements for our SAP Solutions segment were $16.8 million for the fourth quarter of 2024, an increase of 51% when compared to the same period in the prior year.
Rob Ramirez: primarily driven by strong software related sales in the quarter resulting from the increased sales investments we made in late 2023.
Rob Ramirez: The overall performance in the fourth quarter will temper our first quarter outlook, but we expect demand for our SMP services to be strong throughout the balance of the year.
Rob Ramirez: Approximately 22% 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, and application managed service contracts.
Rob Ramirez: Total company adjusted cost of sales, which excludes reimbursable expenses, non-cash stock-based compensation expense, and all acquisition-related cash and non-cash compensation expense,
Rob Ramirez: totaled $40.5 million, or 52.3% of revenues before reimbursements in the fourth quarter of 2024, as compared to $40.4 million, or 56.7% of revenues before reimbursements in the prior year.
Rob Ramirez: Total consultant headcount was 1,284 at the end of the fourth quarter, as compared to 1,262 in the previous quarter and 1,168 at the end of the fourth quarter of 2023.
Rob Ramirez: Fourth quarter ending headcount was primarily driven by increases from our Gen-AI acquisition and increasing hiring in our Gen-AI practices.
Total Company Adjusted Gross Margin on Revenues Before Reimbursements
Thank you very much.
Rob Ramirez: was 47.7% in the fourth quarter of 2024 as compared to 43.3% in the prior year.
Rob Ramirez: The improvement in gross margin was primarily driven by higher value-added reseller sales during the quarter and the higher-margin Gen-AI consulting and implementation revenue in global SMBT.
adjusted SG&A
Rob Ramirez: which excludes non-cash, stock-based compensation expense and all acquisition-related cash and non-cash expenses, amortization of intangible assets, and one-time legal settlements.
Rob Ramirez: was $18.4 million, or 23.7% of revenues before reimbursements in the fourth quarter of 2024.
Rob Ramirez: This is compared to $15.4 million, or 21.6% of revenues before reimbursements in the prior year.
Rob Ramirez: The year-over-year absolute dollar increase is primarily due to incremental commissions from increased SAP segment sales and increase in center compensation expense commensurate with company performance.
Rob Ramirez: Adjusted EBITDA, which excludes non-cash, stock-based compensation expense, all accumulation-related cash and non-cash expenses, amortization of intangible assets and one-time legal settlements.
Rob Ramirez: was $19.5 million, or 25.2% of revenues before reimbursements in the fourth quarter of 2024, as compared to $16.3 million, or 23% of revenues before reimbursements in the prior year.
Our 2024 GAAP Net Income includes
Rob Ramirez: and Acquisition-Related Cash and Non-Cash Compensation and Related Expenses of $2.3 million, which in total impacted our Q4 2024 GAAP results by 23 cents.
Rob Ramirez: 2023 GAAP debt income includes the Gartner Legal Settlement and related costs of $1.2 million or $0.03 per delivered earnings per share.
Rob Ramirez: Adjusted net income and diluted earnings per share, which exclude non-cash stock-based compensation expense, all acquisition-related cash and non-cash expenses.
Amortization of Intangible Assets and Guantanamo legal settlements
Rob Ramirez: that the fourth quarter of 2024 totaled $13.6 million or adjusted diluted net income per common share of $0.47.
Rob Ramirez: which is above the top end of our earnings guidance range and compares to prior year adjusted diluted net income per common share of 39 cents.
Rob Ramirez: Acquisition related cash and non-cash stock compensation expense relates to a portion of the purchase consideration for the Leeway-Hertz acquisition completed in September 2024.
Rob Ramirez: The consideration contains either performance or service vesting requirements and as such is reflected as compensation expense under GAAP rather than purchase consideration.
Rob Ramirez: The company's cash balances were $16.4 million at the end of the fourth quarter, escalating to $10 million at the end of the previous quarter.
Next.
and the order was $20.6 million.
Rob Ramirez: primarily driven by net income adjusted for non-cash activity, increases in accrued expenses, and decreases in accounts receivable. Our DSO, or day sales outstanding, was 66 days at the end of the quarter, as compared to 70 days at the end of the previous quarter and 65 days in the prior year.
Rob Ramirez: During the fourth quarter of 2024, the company paid down $7 million on its credit facility.
Rob Ramirez: The balance of the company's total debt outstanding at the end of the fourth quarter of 2024 was approximately $13 million.
Rob Ramirez: During the quarter, we repurchased 117,000 shares of the company's stock for an average of $30.95 per share at a total cost of approximately $3.6 million.
Rob Ramirez: Our remaining stock repurchase authorization at the end of the fourth quarter was $27.5 million.
at his most recent meeting.
Rob Ramirez: The company's Board of Directors authorized a 9% increase in its annual dividend from $0.44 to $0.48 per share.
to be very quarterly.
Rob Ramirez: and declared the first quarterly dividend of $0.12 per share for shareholders of record on March 21, 2025 to be paid on April 4, 2025.
as we move sequentially from Q4 to Q1.
Rob Ramirez: Specifically consistent with previous years, our first quarter guidance for 2025 will reflect the sequential increase in US payroll related taxes and sequential buildup of our vacation goals.
Rob Ramirez: The company estimates that total revenues before reimbursements for the first quarter of 2025
to be in the range of 75 to 76.5 million.
Rob Ramirez: We expect global SWT segment revenue before reimbursements to be up 5% to 10% when compared to the prior year, driven by strong GNI revenue growth, partially offset by declines in one stream and RE procurement practices.
Rob Ramirez: We expect both Oracle Solutions and SAP Solutions segment revenue before reimbursements to be down compared to the prior year. On a combined basis, we expect them to be down 8 to 10 percent.
Rob Ramirez: We estimate adjusted diluted net income per common share in the first quarter of 2025 to be in the range of $0.39 to $0.41, which assumes a gap effective tax rate on adjusted earnings of 22%.
Rob Ramirez: We expect the adjusted gross margin as a percentage of revenues before reimbursements to be approximately 43 to 44 percent.
Rob Ramirez: We expect adjusted SG&A and interest expense for the first quarter to be approximately $18.8 million.
Rob Ramirez: We expect first quarter adjusted EBITDA as a percentage of revenues before reimbursements.
Rob Ramirez: to be in the range of approximately 21 to 22 percent.
Rob Ramirez: Lastly, we expect cash balances in the first quarter, excluding the impact of shared buyback activity, to be tempered primarily due to the payment of 2024 performance-related bonuses.
Ted Fernandez: At this point, I'll turn it back over to Ted to review our market outlook and strategic priorities for the coming months.
Ted Fernandez: 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 our organization.
Ted Fernandez: In 2025, we expect IT budgets to increase, with increasing attention and allocations to the rapidly emerging Gen-AI solutions and the related opportunities and threats it brings to all industries.
Ted Fernandez: While in 2024, Gen-AI budgets will primarily focus on developing awareness of AI, in 2025 you will see increasing amount of IT budgets specifically allocated to Gen-AI initiatives in high feasibility and high impact areas.
Ted Fernandez: We also expect to see an increasing investment in data quality and value initiatives that are critical to any Gen-AI strategy.
Ted Fernandez: The unlimited potential of AI will define an entirely new level of Gen-AI-enabled world-class performance standards, driving all software and services providers to extend the value of their existing offerings with the introduction of AI agent extensions.
Ted Fernandez: We believe this will result in unprecedented innovations, which all organizations will have to consider. This shift is consistent with our aggressive pivot to GNI-enabled transformations, which we believe positions a generational value creation opportunity for our organization.
Strategically, we continue to focus on recurring high-margin IP-related services.
Ted Fernandez: But what is new is the accelerated focus and investments we are making in all of our Gen AI capabilities. The most significant investments have been in the development of our AI Explorer platform and in the training and development of our associates.
Ted Fernandez: Our strategic acquisition of Leroy Hertz further expanded and accelerated all of our efforts. This will further accelerate as we fund the expansion of our joint venture.
Ted Fernandez: We are utilizing the AI Explorer platform as the vehicle to integrate the Gen AI capabilities and impact across all of our offerings.
Ted Fernandez: We also continue to hire and upgrade our skills in critical data and technology architecture technology architecture resources to further support our efforts. These efforts are rapidly allowing us to become key architects, advisors, and consultants of our clients' GNI journey.
Ted Fernandez: We now believe that AI Explore will be our primary strategic entry point to clients that we will use to position our traditionally strong benchmarking digital transformation and executive advisory offerings.
Ted Fernandez: And the platforms that result in our latest digital transformation and cloud application consulting relationships. The halo or downstream revenue impact of these offerings
Ted Fernandez: has traditionally been around 40% over the last several years. We believe this will only be expanded by our AI Explorer offering.
Ted Fernandez: and the enterprise-wide strategic access it provides. AI Explorer significantly enhances the value of our IP and fully aligns it with emerging Gen-AI world-class performance standards.
Ted Fernandez: Another critical investment that we have made is to build our own Gen-AI-assisted knowledge-based solution called AppHacket AI.
Ted Fernandez: We expect the integration of our valuable IP and content that leverages Genii to significantly enhance the delivery of our insight that we are asked to provide to our clients every day but much faster and with significantly more personalized insight.
Ted Fernandez: We are ingesting proprietary IP, including benchmarking, best practices, research IP to support the myriads of queries that were required to support our executive advisory.
and consulting. A consulting. Okay. Thank you. Okay.
Ted Fernandez: We have also embarked on a new initiative called Accelerator. It intends to address the efficiency and quality of the delivery of our technology implementation-related services.
Ted Fernandez: All these initiatives are harnessing the power of DEN AI to improve and accelerate the delivery of our solutions and services with the intent of differentiating our capabilities and result in improved revenue growth and margins.
Ted Fernandez: We also see the potential commercial value of these innovations beyond our internal use.
Ted Fernandez: On the talent side, competition for experienced executives with high technology agility continues. Overall, we saw turnover continue to moderate, remain low during the quarter. We expect that trend to continue.
Ted Fernandez: We also continue to explore strategic partnerships and acquisitions that will allow us to extend our Gen-AI capabilities and sell our IP through new channels that will allow us to reach beyond our current Global 1000 focus in an efficient manner.
Ted Fernandez: We are continuing to add videos of our new and expanding platforms on the Investor Relations page of our website that investors can review to become more familiar with our new capabilities.
Ted Fernandez: Lastly, even though we believe we have the client base and the offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our RIP and add scope, scale, and capability, which can accelerate our growth.
Ted Fernandez: As always, let me close by congratulating our associates on our performance and by thanking them for their tireless efforts and always ask them to remain to stay focused on our clients and our people no matter what challenges we may encounter.
Ted Fernandez: Those conclude my comments. Let me turn it over to the operator who will move us into the Q&A section of our call.
operator
Ted Fernandez: Yes, the phone lines are now open for questions. If you would like to ask a question over the phone, please press star 1 and record your name. To withdraw your question, press star 2. The first question in the queue is from George Sutton with Craig Hallam. Your line is open.
George Sutton: Thank you. Ted, it was nice to hear you call out some revenues.
George Sutton: and the influence that Gen-AI had in the fourth quarter and will have in Q1. I wondered if you could give us a little more detail on the breadth of what you're working on. Give us a sense of what the pipeline might look like.
George Sutton: Well, let me say at the highest level, let's just say that both our client entry points or meetings that we're having and even the content, which our executive advisory and market intelligence clients.
are leveraging is...
George Sutton: being significantly skewed to Gen-AI related questions and comments and interests.
So that really drives.
Our meeting counts.
George Sutton: It drives our client engagements and look, George, you know we've worked really hard to get out in front of this by launching AX4 at the beginning of last year.
All of that work we did in 2024.
George Sutton: when you bring that together with the acquisition of leeway herds and the fact that they bring not only great engineering capability but
and orchestration, an agentic workflow, orchestration platform.
George Sutton: really allows us to be incredibly competitive. We believe we're at the tip of the spear.
on these opportunities.
George Sutton: So, look, whether it's meeting counts, whether it's discussion with clients.
George Sutton: and or revenue that we booked and saw on a sequential basis look the opportunities are expanding for us and I think we're just
George Sutton: If you look back just a year, we're a dramatically different organization with, we believe, very unique capabilities which we've assembled throughout 2024, and so hopefully that provides some context to your question.
So, I thought about you immediately when I...
George Sutton: really understood what DeepSeq had done, which was dramatically reduce the power of compute and or the cost of compute. And it seemed right down central to really accelerate the application side of AI, which I thought you would be a direct beneficiary of. Can you give us a sense of how that
George Sutton: And it powers the Gen-AI solutions which we identify, evaluate, and
and are working with our clients with.
George Sutton: So, one to see capabilities expand, supposedly the price points relative to those capabilities go down, in my mind, is very positive for the end user.
George Sutton: It infers that you're going to get greater, you're going to get access to this knowledge base.
George Sutton: with all of this GPU power, and now with a growing capability on its ability to infirm, reason, and help you and assist you in many ways. For us,
For us
George Sutton: Our capability, we have focused and believe we are experts at solutioning.
George Sutton: a Gen AI opportunity from ideation all the way through a fully deployed solution at scale.
George Sutton: So, I can tell you that the innovation that we've had in developing our capability with every version of AX4 that we've released, with the third one coming out this quarter, and now the addition, I can't tell you how...
George Sutton: The capabilities are improving across all dimensions of Gen-AI deployment and the DeepSeq.
Speaker Change: is typically fairly lumpy business for you. Sounds like it really picked up this past quarter. Can you just give us a duration expectation? Is this a new level for the SAP business given the investments you've made or are these more one-time projects?
ARF
Speaker Change: Look, we strongly benefited from the sale of software at the tail end of the year. It was the highest level we've ever achieved.
Speaker Change: In fact, unfortunately, I can't say that we can continue at that pace from Q4 to Q1, primarily because one is end-of-year activity and the other is first quarter.
Our SAP demand when we look throughout 2025
You know, we're expecting it to be a very strong.
Speaker Change: And that's before we see some of the SAP-agentic capabilities that it's now starting to tout. So we hope it's a strong year for SAP and our SAP group.
Okay, thanks guys.
Speaker Change: And as a reminder, if you would like to ask a question over the phone, please press star one and record your name.
Speaker Change: The next question in the queue is from Jeff Martin with Roth Capital Partners. Your line is open.
Hey, good evening Ted and Robert. How are you?
Hey, Jeff. Hey, Jeff.
Speaker Change: What kind of visibility do you have on pipeline conversion over the next couple of quarters here?
Speaker Change: We see increasing activity but more importantly we see clients with budgeted 2025 initiatives planned.
Speaker Change: which really changes the engagement for us. So, it's a combination of both. We're better prepared and...
Speaker Change: then when we were a year ago. And clients don't need to be convinced about the Gen-AI opportunity, what it means to their industry, of them.
Speaker Change: We think that we're just going to see velocity in the pipeline, and we're also hoping that entry points
Solutions
Speaker Change: spending will increase their spend throughout the year with us, so we're hoping for a combination of both.
a better budgeted client.
Speaker Change: We're significantly, I'll call it, more prepared than we were 12 months ago.
and the fact that an entry point is just that.
Speaker Change: Once you're able to demonstrate value with a select or a few use cases or solutions as we refer to them, we believe that clients will continue to increase their spending in the category.
Look, it's very promising.
Speaker Change: I wanted to get your perspective on implementation projects, both in terms of
Speaker Change: scale and scope, what kind of duration are we looking at, what kind of average implementation projects are you doing today, and where where could that go, you know, one to two years out from here?
Well, if you really think through the 2024 cadence.
Both our capabilities and the opportunities are...
are just better defined.
Speaker Change: Clients are better prepared to have a conversation on how to prioritize and to give you some examples of
Speaker Change: Look, we go all the way from offering a client something we call a fast start program so they have a chance to become familiar with our platforms and our capabilities.
Speaker Change: and they have resulted in licensing agreements that have been as long as three years. But know that all of these contracts and all of this activity kind of happened in the tail end and toward the second half of the year.
and how they built for us, but.
I can't tell you the difference between
budgeted clients with knowledge of Gen-AI versus
educating clients.
Speaker Change: trying to understand and assess their opportunities in 2024 without having meaningful budgeted dollars last year. I think it's a significant difference. And we'll have a significant difference in the number of clients that we bring on board and the way clients scale throughout the year.
Speaker Change: And then last question for me is, you mentioned Ipoh, Pyrmint, and OneStream were headwinds to the fourth quarter. I was just curious if you could talk a little bit about that.
Speaker Change: quantify that and then also give us a sense of what your outlook is for those two areas for the balance of this year.
Speaker Change: Well, there is no doubt that the, let's call it, the Gen-AI, I'll call it, opportunities
Speaker Change: are somewhat, or can be disruptive to the enterprise application companies.
Speaker Change: So, as you've seen, just in recent weeks, I'm not even going to say months,
Speaker Change: Virtually every enterprise application company has announced some form of extended AI and
Speaker Change: AI agents or agentic workflows that extend the value of their existing enterprise applications.
That will be disruptive, but if you go to...
Agent Force
Speaker Change: as well as what it's meant to their, I'll call it, traditional cloud application sales. I think you get a feel for both the opportunity, which I think Salesforce is starting to harvest,
Speaker Change: But if you go back and look at Salesforce, maybe six months earlier, as it was building out its Einstein capability, they had some disruption as well as they were looking at what Gen AI meant to them.
Speaker Change: Are we surprised that it's creating a little bit of a pause when people think of their technology investment? The answer is no. Are the enterprise applications quickly responding to the challenge? The answer is yes.
Speaker Change: And you're going to see, it's the fight for, I'll call it a gentic workflow and the delivery of...
Enterprise Functionality
Speaker Change: utilizing and leveraging foundational models either through an enterprise application or through I'll call them independently built solutions, it's just going to be fun to watch. Clients are going to have significant opportunities to improve and they're going to have technologies available to them they didn't have 18 months ago, but that does not come without some disruptions so I'm not surprised that
Speaker Change: We're seeing that happen and we'll see that happen as people integrate agentic capabilities into their current cloud apps.
Speaker Change: And then are you able to quantify the headwind from Ibo Kierman in one stream?
Speaker Change: Well, they were meaningful enough for us to mention. So for us to say that...
You know, our GSAT group,
Speaker Change: A 4% let's just say that without that disruption that GSBT group would have been up meaningfully higher just to give you some reference but it was meaningful enough to affect the reported growth of the segment.
Fair enough. Thank you. That's helpful.
Mm-hmm.
Speaker Change: And the next question in the queue is from Vincent Colicchio with Barrington Research. Your line is open.
Hey, good afternoon Ted
Vincent Colicchio: So, what are your thoughts on the outlook for Oracle as we move beyond Q1?
Vincent Colicchio: Oracle activity remains, as I said, strong. On the EPM side, which you know we've strongly benefited from here over the last 24 months with them, probably stronger than on the ERP side, but look
Vincent Colicchio: We expect the enterprise application companies to participate in this extended AI capabilities delivered through agents.
Vincent Colicchio: I think Salesforce has proven that. I expect Oracle, SAP, OneStream, all others to benefit in similar ways. They'll have to explain the additional value that comes from these new capabilities to clients.
Vincent Colicchio: and look, it may impact some of the velocity in their pipeline, for some, it may not for others.
Vincent Colicchio: And do you need to ramp your gen AI labor capabilities to meet your demand expectations for 25?
Vincent Colicchio: And are you seeing any incremental interest in the joint venture? Any update there would be helpful.
Vincent Colicchio: I can report that it's starting to sign licenses. We are working through the details to the final, I'll call it, agreement.
Vincent Colicchio: So AI Explorer and Zbrain will be both reside inside of the joint venture.
Vincent Colicchio: They will allow us to fully leverage, explore, use some of the Z-Brain infrastructure capabilities which are going to be very valuable to explore.
and we will offer the clients...
Vincent Colicchio: to the license, but we give the client a chance to either license these capabilities or have a consulting facilitated engagement be part of it, and so we expect the licensing activity to increase throughout the year.
Okay, that's it for me. Nice quarter, Ted.
Thank you, Vince.
Speaker Change: At this time, I show no further questions. I will turn the call back over to Mr. Fernandez.
Ted Fernandez: Well, thank you everyone for participating in our fourth quarter earnings call. As you can see, 2025 is expected to be a very exciting year, so we look forward to updating you when we report the first quarter. We'll see you in a few months.
Ted Fernandez: This concludes today's call. Thank you for your participation. You may disconnect at this time.