Q1 2025 The Hackett Group Inc Earnings Call

Thank you for standing by. Today's conference will begin in approximately one minute. Again, today's conference will begin in one minute. Thank you for standing by.

Speaker Change: Welcome to the Hackett Group First Quarter Earnings Conference call. Your lines have been placed on a listen only mode until the question and answer session.

Rob Ramirez: Please be advised the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO and Mr. Robert Ramirez, Chief Financial Officer. Thank you Mr. Ramirez, you may begin.

Rob Ramirez: Good afternoon everyone, and thank you for joining us to discuss the Hackett Group's first quarter results.

Speaker Change: Speaking on the call today and here to answer your questions, or Ted Fernandez, Chairman and Chief Executive Officer of the Hackett Group, and myself, Robert Ramirez Chief Financial Officer.

Speaker Change: A press announcement was released over the wires at 405 PM Eastern Time.

Speaker Change: 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 in this call that is not contained in the release of the Investigations page of our website.

Speaker Change: Before we begin, I'd like to remind you that are 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.

Speaker Change: They have all risks, uncertainties, and assumptions are difficult to relate and which may not be accurate. Actual results may vary. These following looking statements should be considered only in conjunction with the detailed information, particularly the risk factors contained in our SEC violence.

Ted Fernandez: At this point, I would like to turn it over to Ted

Ted Fernandez: Thank you Rob and welcome everyone to our first quarter earnings call. As we normally do I will open up 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 also provide guidance.

Ted Fernandez: We will then review our market and strategy related comments after which we will open it up to Q&A. This afternoon we reported revenues before reimbursements of $76.2 million and adjusted earnings per share of 41 cents.

Ted Fernandez: Near and at the high end of our portal to guidance, respectively.

Ted Fernandez: A result for driven by the performance of our DSBT segment, which was driven by the strong performance of strong revenue growth from our Gen AI engagements.

Ted Fernandez: Jenny I. Engagements also favorably impacted our gross margin. They demand a higher margin than our traditional consulting and implementation revenues and are driven by the highly differentiated capabilities of our AI Explorer and Zebrain platforms as well as our implementation teams.

Ted Fernandez: Clives continue to move from awareness to budgeted projects, a trend we expect to continue throughout the year. Total GSPT segment revenues were up over 6% were partially offset by weakness in our one-screen and e-precurement practices.

Excluding these practices, our GSPT-7 was of 13%.

Ted Fernandez: We believe Gen AI-enabled transformation is a generational opportunity which will fundamentally change the way companies operate as well as the way consulting services are sold and delivered.

Ted Fernandez: More importantly, most differentiating is the value realization speed of our combined end-to-end capability.

Ted Fernandez: AI Explorer's version 3 capability to dynamically identify AI solutions or use cases, design client-specific solutions.

Ted Fernandez: using Solution Explorer. Evaluate feasibility and determine the use case ROI, as well as suggest the required AI agents necessary to orchestrate the agentic workflow is powerful and unique.

Ted Fernandez: Combined with the multi-agent orchestration capabilities Z-Brain, which allows our clients to build and deploy the AI solution at scale, creates a powerful combination.

Ted Fernandez: It also allows us to serve enterprise-wide from ideation to implementation in one fully integrated platform.

Ted Fernandez: It also provides a client with a single platform which they can license to fully support their entire AI Center of Innovation which we refer to as AI COIs.

Ted Fernandez: As expected, our Oracle solutions was down, but activities continues to be solid.

Ted Fernandez: The segment was impacted by the wind down of a large post-co-live engagement, which was partially offset by the continuing straights of the enterprise performance management or EPM activity resulting from oracles re-establishment of their dedicated EPM sales force.

R.S.A.P. Solution of Segment was down

Ted Fernandez: against a strong Q1 mark from last year, but increasing demand for our market leading life sciences group and the related implementation revenues resulting from our increased software self activity, both well for this group, or in the second quarter as well for the remainder of the year.

Ted Fernandez: These initial meetings also provide us an opportunity to propose new Gen AI-enabled transformation engagements with these clients that position us to serve these clients both strategically and broadly.

Ted Fernandez: On the executive advisory front, we continue to invest into growing and growing our IP face programs.

Ted Fernandez: We believe our move to fully integrate Gen.A.I. content, which is now being further augmented by our Gen.A.I. content which was infused by the leeway hurts that position is being responsive to our client's strong interest in this area.

Ted Fernandez: We recently launched a premium Jenny-I Solutioning Advisory Program with a nationally recognized AI leader to fully leverage our Solutioning Innovation and Implementation knowledge from our platforms and client engagements.

Ted Fernandez: This program will be directly targeted to the AI leaders, CIOs and CTOs who require this knowledge.

Ted Fernandez: On the balance sheet slide, in the near term, you can expect us to use our strong casual from operations to continue our stock buy-by program, rather than just focus on paying down the remainder outstanding balance of our credit facility while continuing to invest in our business.

Rob Ramirez: With that said, let me ask Ralph to provide details on our operating results.

Ted Fernandez: Castlow and also comment on Outlook. I will make additional comments on strategy and market condition following Rob's comments. Rob, thank you, Ted. As I typically do, I'll cover the following topics.

Ted Fernandez: Stern's portion of the call, a covering overview of a first quarter results for 2025, along with an overview of Relentic key operating statistics.

Ted Fernandez: I'll cover an overview of my cash flow activities through the quarter and I'll then conclude with a discussion on our financial outlook for the second quarter of 2025.

Ted Fernandez: For purposes of this call, I will comment separately regarding the revenues of our Global S&B T segment, our Oracle Solution segment, our SAP Solution segment, and the total company.

Fred Schwarzenegger, Business Transformation Offerings

Ted Fernandez: Executive Advisory, Marking Intelligence, and iPads programs, and are one-streaming and hypercurement implementation offerings. All close solutions and our SAP solution segments include the results of our Auckland SAP offerings respectively.

Ted Fernandez: During our call today, we will also refer to certain non-GAAP financial measures which we believe provide useful information to investors.

Ted Fernandez: We have included reconciliation of gap to non-GAAP financial measures in our press release filed earlier today, and we'll post any additional information based on the discussions from this call on the Investor Relations page of the company's website.

Ted Fernandez: For the first quarter of 2025, our total revenue was 77.9 million, up 1% over the prior year. Our revenues before reimbursements were 76.2 million, which was near the high end of our quarterly guidance, also up 1% over the prior year.

Ted Fernandez: The first quarter-reversal expense ratio on revenues before investments was 2.1% as compared to 2.3% in the prior year and 1.9% would compare to the same period in the prior year.

Ted Fernandez: Total revenues from my global SMPD segment were $40.4 million for the first quarter of 2025.

Ted Fernandez: Revings before Reversements for our Global SMT segment with 42.6 million for the first quarter of 2025 an increase of 6% on compared to the same period in the prior year.

Ted Fernandez: The revenue grows from our Geniac Consulting and Implementation Offerings of the Seconds, which partially offset by leapnesses in our one-stream and April-Termine Implementation Offerings during the first quarter. Excluding that decrease, our global SMT segment would have put out 13 percent.

Ted Fernandez: Total revenues from our Oracle Solutions segment were 21.1 million from the first quarter of 2025

Ted Fernandez: Robert Ramirez, before reimbursements fall or closer, we should segment, we're 20.4 million for the first quarter of 2025. A decrease of 3% when compared to the San Creek in the prior year.

Ted Fernandez: The increase is pervailing due to the post-go-life one-down of a large catering as we discuss

Ted Fernandez: Total revenues from our SAP Solution segment were 13.4 million for the first quarter of 2025.

Ted Fernandez: Revenues before reimbursements for our SEPP solution segment were 13.2 million for the first quarter of 2025, a decrease of 8% with compared to the same period in the prior year as expected.

Ted Fernandez: This was part of the journey by Strong, software, related sales in the quarter, resulting from increased investments we made back in late 2023.

Ted Fernandez: Approximately 23 percent of our Colic Company revenues before reimbursements consist of recurring multi-year and subscription revenues, which includes our executive advisory, IT as a service, and application-managed services contracts.

Ted Fernandez: A total company adjusted cost of sales which exclude reversible expenses, non-cash stock-based compensation expense, and all acquisition-related cash and non-cash compensation.

Ted Fernandez: Total 43.1 million, or 56.6% of revenues before investments in the first quarter of 2025.

Ted Fernandez: as compared to $44.4 million or 58.6% of revenues before we had witnessed in the prior year.

Ted Fernandez: District Chris is primarily due to the decreased service costs where they have just selected headcount reductions in global uncertainty in the per year as well as decreased use of some contractors in the quarter.

Ted Fernandez: First quarter ending head count was primarily driven by increases from our genetic acquisition and increased hiring for our genetic AI practices.

Total, a company adjusted gross margin on revenues before reversements.

Ted Fernandez: which excludes re-emersible expenses and non-cash stock-based compensation expense and all acquisition-related cash and non-cash compensation.

Ted Fernandez: was 43.4% in the first quarter of 2035, as compared to 41.4% in the prairie here.

Ted Fernandez: The improvement in growth margins is primarily driven by the higher margin of genetic consulting and implementation revenue and the global FCBT segment.

of Justin S. Chenet, which excludes non-cash stock-based compensation expense and all acquisition-related cash and non-cash expenses.

and Relation of Intangual Assets in one-time legal settlements.

Ted Fernandez: in the prior year, the year where you're an absolute dollar increase from early due to increment of costs associated with delivery rates and C-grade and acquisition, completed in September 2024, and increased recruitment costs in our Jenny H. Practice.

Ted Fernandez: Adjusted EBITDA, which excludes non-cash stock rates, compensation expense, all acquisition-related cash, non-cash expenses, amortization of entangible assets, and one-time legal

Ted Fernandez: was 15.7 million or 20.7% of revenues before investments in the first quarter as compared to 15.2 million or 20% of revenues before investments in the prior year.

Ted Fernandez: Gap net income for the first quarter of 2025, total 3.1 million, for doodered earnings for the year of 11 cents.

Ted Fernandez: As compared to gap then income of 8.7 million, we're the Luger audience per share of 32 cents in the first quarter of the previous year.

Ted Fernandez: First quarter, 2025 gap net income includes non-cash stock compensation expense from our stock price work program initiated in September of 2024 of $5.1 million.

Ted Fernandez: and acquisition-related cash and non-cash compensation and related expenses of a $2.4 million, which in total impacted our Q1 2025 gap results by 23 cents.

Ted Fernandez: Equestational Related Cash and Non-Cash Compensation Expense relates to a portion of the purchase consideration for the Leigh-Wayhurts Acquisition Completion September 2024.

Ted Fernandez: to Consideration Pay to the Cellar to take service, investing requirements and as such is reflective of compensation expense under gap rather than purchase consideration.

Ted Fernandez: Paul Acquisition Related, Tash Non-Tash Expenses, Amorgazation of Intangible Assets, and one-time legal sentiments for the first quarter of 2025, total of $11.6 million, where I just alluded then income for common share of 41 cents.

Ted Fernandez: which is at the top end of an early skies range and compares the prior year adjusted to the blue and then a cup of con share of 39 cents.

Ted Fernandez: The company's cash balances were 9.2 million at the end of the first quarter of 20.5 as compared to 16.4 million at the end of our previous quarter.

Ted Fernandez: Ned Cash provided from operating activities in the quarter, was 4.2 million.

Ted Fernandez: Primarily driven by the income adjusted for non-cash activity and partially offset by decreases in accrued expenses due to the payment of 2024 performance bonuses and increases in

Ted Fernandez: RDSO, or day-to-sales outstanding with 73 days at the end of the quarter as compared to 66 days at the end of the previous quarter and 68 days in the prior year.

Ted Fernandez: The increase in DSO is primarily due to extended terms and milestone deliverables on several large client engagements, but we currently expect a reduction in DSO in the second quarter of 2025.

Ted Fernandez: During the quarter, we would purchase 379,000 shares of the company stock, for an average of $3.93 per share, at a total cost of approximately 11.7 million.

Ted Fernandez: including practices from employees to satisfy in contextual holding triggered by the best thing that restricted shares.

Ted Fernandez: Our remaining stock repurchase authorization at the end of the fourth quarter was 21.3 million.

Ted Fernandez: During the quarter, the company borrowed $5 million from its credit facility.

Ted Fernandez: The balance of the company's total debt outstanding at the end of the first quarter was approximately 18 million.

Ted Fernandez: At his most recent meeting, subsequent to quarter-end, the company's board of directors declared the second-quarter dividend of $12 per share for a shareholder of record on June 20th, 2025, to be paid on July 7th, 2025.

Ted Fernandez: Now moving to second quarter guidance, the company estimates total revenue of the four reimbursements for the second quarter of 2025 to be the range of 76 to 77.25 million.

Ted Fernandez: We expect global SVT segment revenue before reimbursements to be up approximately 5% when compared to the prior year.

Ted Fernandez: We expect both Oracle Solutions and SAP Solutions segment on a combined basis revenue before reimbursements to be down when compared to the prior year.

Ted Fernandez: We estimate adjusted deluded net income per share in the second quarter of 2025 to be in the range of 37 to 39 cents.

Ted Fernandez: which assumes a gap effective tax rate on just an earnings of 27 percent.

Ted Fernandez: We expect adjusted gross margin as percentage of run needs before reimbursements to be approximately 43 to 44 percent.

Ted Fernandez: We expect adjusted SGNA and inter-six points for the second quarter to be approximately 18.6 million.

Ted Fernandez: We expect a second quarter adjusted evita as a percentage of revenues before reimbursements to be in the range of approximately twenty-one and twenty-two percent.

Ted Fernandez: Lastly, we expect casual from operations to be up on a sequential basis.

Ted Fernandez: At this point, I'd like to turn it back over to Ted to review a market outlook on strategic priorities for some of the months.

Ted Fernandez: Although demand for digital transformation remains strong in traditional areas, it continues to be impacted by thoughtful decision-making as organizations accept competing priorities due to the economic concerns and the consideration of emerging Gen.A.I. technologies.

Ted Fernandez: What is new is the increased uncertainty that pair of negotiations will have on client short-term decision-making.

Ted Fernandez: We continue to expect IT budgets to increase, with increasing attention and allocations to the rapidly emerging Gen.A.I. solutions and the related opportunities and threats it brings to all industries.

Ted Fernandez: While in 2024, Gen.A.I. budgets were primarily focused on developing awareness in AI. In 2025, we expect to see an increase in amount of AIP budgets specifically allocated to Gen.A.I. initiatives in high feasibility, high impact areas.

Ted Fernandez: We also expect to see an increasing investment in data quality and value initiatives which are also critical to any Jenny-I 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 ship is consistent with our representative to Gen AI-enabled transformations which we believe positions are company with unique value creation opportunities.

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 resulted in our acquisition of Levi Hertz, a highly recognized provider of advanced Gen.A.I. solutions. The acquisition also included a sophisticated Gen.A.I.I orchestration platform, Z-Brain, which we agreed to contribute into a joint venture with the founder of Leigh Way Hertz.

Ted Fernandez: The JB will bring together the AI Explorer and Zebra software platforms and will focus on licensing the platforms and creating what we believe will be a first of its kind, Gen AI, ideation through implementation software as a service offering.

Ted Fernandez: We believe this JB created entirely new value tradition opportunity for our shareholders that should result from growth of ARR and your recurring licensing revenues.

Ted Fernandez: It should also allow the JV to have the opportunity to raise capital and achieve standalone valuations due to its Gen.A.I. software focus.

Ted Fernandez: Our acquisition of Lee Wenhurts combined with our AI Explorer and Jennie Eye Consulting capabilities is expected to have a consequential impact on our 20-25 results.

Ted Fernandez: With our meaningful market insight, we continue to innovate and make powerful improvements to AI Explorer, and that's capital XP allowed by the way. In fact, we recently released version 3, which brings significant enhancements that allow us to highly differentiate our offerings further.

Ted Fernandez: The most important of the enhances in version 3 is our ability to simulate an organization's enterprise GNI solutions by leveraging Hackett's proprietary solution IP and identifying AI automation opportunities at a work step level.

Ted Fernandez: This enables us to identify thousands of Gen.A.I. solutions and to rapidly custom design any value A.I.U. cases prioritized by our clients.

Ted Fernandez: and also recommend the specific ages required to build these solutions.

Ted Fernandez: Our platform allows us to do this in a fraction of the time that other providers are offering.

Ted Fernandez: Our unique combination of strategic access to clients with the speed and solution provided by our platform is now attracting channel partners which could increase our ability to introduce our platforms and related services at an Linux and accelerate our growth.

Ted Fernandez: We have never been in a situation with such unique capability and complete assets to be able to take advantage of such a powerful technology revolution.

Ted Fernandez: We also continue to hire and upgrade our skills and critical data and tech 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 Jenny I enabled transformation augmented via Explorer 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: The halo effect or downstream revenue impact of these offerings has traditionally been around 40% over the last several years. We believe this will only be expanded by our AI Explorer offering and the enterprise wide strategic access it provides.

Ted Fernandez: AI Explore Significantly Enhances the Value of All Peace, RIT, and fully aligns it with the Emergy Gen.A.I. World Class Performance Standards.

Ted Fernandez: Another critical investment that we have made is to also build our own Genai-assisted knowledge-based solution called As Hackett API.

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.

Ted Fernandez: but much faster and would significantly more personalized insight. We are ingesting proprietary IP, including our benchmarking best practices, research IP, to support the myriad of queries that are required to support our executive advisory and consulting clients as well as our own associates.

Ted Fernandez: We have also embarked on a new initiative called Accelerator, AI-X-E-L-E-R-A-T-O-R, which intends to also address the efficiency and quality of the delivery of our technology implementation services.

Ted Fernandez: All these initiatives are harnessing the power of Jenny-I 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 experience executives with high technology, agility continues. Overall, we stopped turning over, continue to moderate and remain low during the quarter, and we expect that train to continue.

Ted Fernandez: We also continue to explore strategic relationships beyond the ones that I previously mentioned, and acquisitions that will allow us to extend our Jenny I 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: As I previously mentioned on our calls, we are continuing to add videos of our new and expanding platforms on the investor relations page of our website that investor can review and become more familiar with our new capabilities.

Ted Fernandez: Lastly, even though we believe that we have the client base in the offerings to grow our business.

Ted Fernandez: We continue to look for acquisitions and alliances that strategically leverage RIP and scope, scale and capability which can accelerate our growth.

Ted Fernandez: As always, let me close by congratulating our associates on our innovation and performance and by thanking them for their tireless efforts and always urge them to stay highly focused on our clients and people no matter what challenges we may encounter.

Ted Fernandez: Does conclude my comments? Let me turn it over to our operator and let us move on to the GNA, the Q&A section of our call. Operator.

Speaker Change: Thank you. If you would like to ask a question, please unmute your phone. Press star one and record your first and last name fully and clearly when prompted. Our first call here is Jeff Martin with Roth Capital Partners. You may go ahead.

Jeff Martin: Thanks, good evening, Ted and Robert. Ted wanted to jump in, but I just asked him to elaborate on some of the client interactions you've had.

Speaker Change: with AI Explorer. What the pipeline looks for implementation projects and, you know, you mentioned the aspect acceleration throughout the year. How might that look as we progress into the backup?

Speaker Change: Please stand by, we're not getting any sound from the speakers. One moment, please.

again, Jeff.

Speaker Change: Let me go back and specifically speak to the client interactions. What we continuously hear from the clients is the fact that our capabilities are very unique, our ability

Speaker Change: and associate all of that ideation and evaluation and assessment to specific AI agents that would be required to build those solutions if incredibly unique.

Speaker Change: That ability that we created from the onset to be able to evaluate the automation opportunities at a work step level and build that into full simulation. Now industry process flows is very, very unique.

Speaker Change: That is why we continue to say we've never been in such a prepared and complete and powerful opportunity as an organization around such a powerful cycle. So, what does that mean? I'm going to say that

Speaker Change: It's just a pretty, it's just been a very, very favorable reaction from clients.

Speaker Change: So the question for us is whether we continue to pursue our own leagues.

Speaker Change: As we have been since the beginning that since we launched AI Explorer and as we continue since the acquisition of Zebrain is whether we will do that with significantly larger channel partners.

The inquiries that we've gotten from both large systems integrators.

Do something with some...

Speaker Change: or a few of these partners that will allow us then to see more advance our opportunities and will allow us to do that with a broader entry point since some of them bring stronger.

Speaker Change: Technology relationships that Hackett has, so it's not only we think we will see more opportunities but will be be in front of the technology buyer as well as the business buyer who knows Hackett so well.

Very helpful. And then towards the end of 2024, you...

Speaker Change: I had completed, I believe, correcting if I'm wrong, a doubling of the implementation capacity on the AI side of the business, just curious how you feel about your current capacity and what's your plan to scale that further, perhaps in 2025 and 2026.

Speaker Change: Interact with some of our new engagement opportunities. So we're expanding both the tip and we're expanding the back end of the capabilities.

Speaker Change: Okay, one more if I could, and then I'll pass it on. Could you give us an update on the progress of the joint venture with the brain? Are you signing ARR contracts and anything else you are prepared at the moment to disclose on that?

Speaker Change: Well, first let me answer the last part of your question. We are continuing to add licensed clients to the Zebrain platform, and we are close to completing and executing the AV agreement. We expect to do that.

Speaker Change: I don't know, we should be able to do that in the next 30 to 45 days

Thank you You

Speaker Change: And our next question comes from George Sutton with Craig Hallam. You may go ahead.

Speaker Change: Thank you. Ted, we had a first on this call. You were silent for 30 seconds. No one has ever left you speechless. So I found that interesting. So as a best practices consultant

Speaker Change: in a environment that's going through huge change, and just curious how that how that potentially benefits your business, how that potentially challenges your business as we look forward.

Speaker Change: Well, we clearly, you know, what we didn't expect at the beginning of the year would be to...

Speaker Change: developed any campaign around economic disruption. I mean, if you said, hey, Ted, when you were developing 2025 plan, did you consider the fact that there could be some introduction of this ambitious terrifying plan that that could

Speaker Change: Disrupt the economic activity, you're at least allowed to pause and consider the impact on them. The answer is no.

Tara Flutter, Ricken,

Speaker Change: Related disruptions that obviously the nature of the work we do around strategic cost reduction and the deployment of addressing in

Speaker Change: efficiency and effectiveness at the highest level. We have brought that back out of our bad more aggressively than we expected in 2025.

Speaker Change: on the, as it relates to the Gen.A.I related work, no, we think that the client engagement

Speaker Change: Around Jenny, I related capability continues to improve. I believe those things are budgeted. It could budgeted ideas be disrupted by larger budgeted items. I guess it could. But the interest, the engagement, the interaction.

Speaker Change: Both from the clients and the channel partners is very high.

Speaker Change: You mentioned a consequential impact on 25 results from the AIX, or I'm just curious if you can give us a better sense of what you mean by consequential.

Speaker Change: To me, I saw it one of two ways. First, it's already been consequential.

Speaker Change: because the Gen AI growth obviously on a year-over-year basis is becoming more material, each quarter. But the second consequence in my mind in 2025 that I still expect to realize.

Speaker Change: We haven't started the license explorer yet, although the offer has been made out there. We expect the licensing of Explorer to start in July , even though we wanted that to be quicker, but we're to those who have a license interest to explore. Thank you very much.

Speaker Change: We had this kind of 90 day kind of program, which is a fully facilitated engagement which could then result in a license.

Speaker Change: and then the licensing activity in Z-Brain has clearly started as well, but to me the consequential impact would be that both that the growth and AR are becomes meaningful.

Speaker Change: and that the J.V. then had the opportunity to explore if you want to call it...

Speaker Change: Value Accelerating Activities, like doing some kind of a series a round to fund the more accelerated growth in the JV itself and in the licensing of the platforms.

Speaker Change: So, some combination of the impact we're already experiencing in Gen. A. Revenue Growth.

Speaker Change: prominent or visible, but we're already experiencing the revenue growth and

to bring in some combination of channel partners.

Speaker Change: or investors who may also be channel partners into the J.V.

Speaker Change: and allowing that ARR pursuit to come with a much broader distribution channel. So those are the things and that's how we evaluate consequence to 25 as it relates to our day and a Jenny-I opportunity.

Speaker Change: Can you share some example of what the ideal situation has been and what you'd love to see implemented across a lot of other companies?

Ideal situation is the overwhelming majority of the clients.

Speaker Change: Individual Productivity Initiatives, driven around the deployment of co-pilot or other, if you want to call it, chatbot-related extended AI opportunities.

The Major Opportunities

Speaker Change: The Deplorgin AI is when you identify the enterprise-wide opportunity for a company.

Speaker Change: So, instead of saying a client saying, gosh, I'd like to get introduced to AI and let me pick an area that is of lower risk and lower ROI as a way of educating and launching our efforts. I would say that a majority of the clients are in that what I call bottoms-up process.

Speaker Change: Our valued proposition comes by being able to engage clients top-down, providing the clients with an enterprise-wide opportunity of the AI solutions in an 80.

Speaker Change: In the best scenarios that we've had is when the organization, Vincent, I'd like to pursue a basket.

But they clearly include the more breakthrough or transformative solutions.

Speaker Change: that requires some level of sophistication the way you bring data sources together to create a knowledge base that all clients to make decisions.

Speaker Change: that they wouldn't ordinarily be able to make, either as quickly or as precisely as you would expect. So I call that exponential intelligence. In the middle layer of the solutions are clients and say, okay, I want to transform processes.

Speaker Change: So you're looking for significant both improvements in efficiency and effectiveness.

Speaker Change: I'm going to say that is where more of the ambitious opportunities are.

I would talk about the exponential intelligence opportunities.

to be those that have been moving to organizations.

Speaker Change: The way you saw Clark that I mentioned on CNBC's come out, some of the solutions that Palantir has taken on but there's just

A myriad of those opportunities that go way beyond.

a Palantir I'll call it Um.

Speaker Change: a dedicated solution. And then at the bottom of those incremental is when you extend AI and just improve the capability and extend the capability of enterprise software.

Speaker Change: It's used, it's analysis, the way Salesforce does so beautifully with Agent Force and others are now trying to emulate that Salesforce lead. So perfect scenario, a client that looks at it, top down, select sophisticated.

Speaker Change: Middle of the road, transformative and incremental solutions, and then you are building then you know then you've got a client that's committing to a multi-year plan, and you're talking of millions of dollars to build those that solution program out for the client and then for us.

Speaker Change: Not surface, but increasingly gain attention as the JB becomes more prominent.

That's just perfect. Thank you.

Thank you George.

Speaker Change: In our last question comes from Vincent Colicchio with Barrington Research, you may go ahead.

Vincent Colicchio: Excuse me, what portion of AI revenue was implementation revenue in the quarter, and how should that change going forward?

Vincent Colicchio: Robert's looking at me knowing that he has a provided business information, but I would estimate that it would be 50-50 if I had to say and that 50-50 split.

Vincent Colicchio: As the business grows, the actual building and deployment of solutions should become significantly greater than the discovery ideation and evaluation of the opportunities.

multiple topics of it.

Speaker Change: Okay, and are you seeing cross selling from your GNI consulting clients and two other services as of yet?

The answer is yes.

So what's probably been most

A prominent for us.

Speaker Change: is to provide a digital transformation engagement that includes a GNI scan, a way to enhance that digital transformation initiative.

with something that would be more powerful and more ambitious.

that become with a Gen A.I. solution.

and about we'd like.

Speaker Change: Obviously, we have bigger numbers in the traditional entry point and client, traditional clients. So, that idea of taking clients from digital transformation to GAI-enabled transformation with the AI scan.

Speaker Change: I mean, that would be a perfect path for us to be able to start traditionally move into the Gen AI and then leave a client where they complete AI CLI platform that supports all of their AI solution efforts.

Speaker Change: and then how was the pipeline looking for Oracle and should we expect sequential flatness or any help on the direction of that as it moves through the year?

No, I think Rob said that-

Oracle's activity is probably down the FAP's momentum is clearly up.

Speaker Change: Oracle's demand, overall activity is solid, but as we mentioned, we're still trying to fill gaps from the large post-go-live engagement that we had in Q4 and into Q1. Okay, thank you.

Speaker Change: And at this time I show no further questions. I will now turn the call back to Mr. Fernandez.

Ted Fernandez: Thank you operator. Let me thank everyone for participating in our first quarter earnings fall. We look forward to bringing everyone back up to speed and once we have a chance to report the second quarter. Thank you for participating today.

. . .

Ted Fernandez: And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.