Welcome to The Hackett Group Fourth Quarter Earnings Call. [Operator Instructions] 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.

Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss The Hackett Group's fourth quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of The Hackett Group; and myself, Rob Ramirez, CFO. Our press announcement was released over the wires at 4:07 p.m. Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data discussed on this call that is not contained in the release on the Investor Relations page of our website. We will also briefly discuss on today's call the tender offer that we just announced. We would like to point out that the tender offer has not yet commenced. We encourage stockholders to read the tender offer materials that will become available tomorrow as those documents will contain important information about the tender offer. A free copy of the tender offer documents that will be filed with the SEC may be obtained, when filed, from the SEC's website or from Hackett's website. We also refer you to the press release we issued at 4:06 p.m. Eastern Time for contact information should you have questions. 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 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, Rob. As we customarily do, I will open up with some overview or highlight comments relative to the quarter. I will then turn it back over to Rob and ask him to comment on our operating results, some detailed cash flow comments, also provide guidance for the quarter and in this quarter specifically, speak to the Dutch tender offer and provide additional details relative to the new credit facility as well. Rob will then turn it back over to me, I will make some market and some strategic overview comments and then we will open it up for Q&A. So let me first start with the overview comments, and again, welcome everyone to The Hackett Group's fourth earnings call. Our fourth quarter was a culmination of another year of strong operating results. Annually, we experienced over 20% earnings growth, which is more impressive when you consider the strong results we reported in 2010, and the volatile global economic environment we continue to operate in. Additionally, we continue to invest in the innovation and with the development and launch of our new Hackett Performance Exchange offerings. As expected, we maintained our momentum exiting the third quarter and finished the year strongly. Q4 revenues came in at $55.5 million, a 14% year-on-year improvement with pro-forma earnings per share of $0.09 both coming in at the high-end of our guidance. On an annual basis we reported 12% revenue growth with our pro-forma net income and EBITDA increasing 20%. Our results continue to emanate from solid market demand from U.S.-based clients, servicing our advisory client base more broadly, cross-selling synergies primarily in our EPM practices and from the success of our new operations in Australia. It is clear that our efforts to expand our brand permission from helping a client define its…

Thank you, Ted. I will cover the following topics during the call: An overview of our 2011 fourth quarter results, along with an overview of related key operating statistics; an overview of our cash flow activities during the quarter; and as Ted mentioned, I'll conclude with a discussion on our financial outlook for the first quarter of 2012, as well as an overview of our stock tender offer and credit facility. For purposes of this call, any references to Hackett Group will specifically exclude ERP Solutions. Correspondingly, I will comment separately regarding the financial results of The Hackett Group, ERP Solutions and the total company. Please note that all references to gross revenues in my discussion represent net revenues plus reimbursable expenses. Additionally, references to pro-forma results specifically exclude noncash stock compensation expense and intangible asset amortization expense and assume a normalized tax rate of 40%. Before I move on to our fourth quarter results, I'd like to make a few comments regarding our annual results for 2011. As Ted mentioned, 2011 proved to be a strong year in terms of revenue and earnings growth. Annual revenues grew to $225 million, a 12% increase from 2010. Pro-forma earnings per diluted share grew to $0.33 in 2011 from $0.27 in 2010, an increase of 22%. For 2011, pro-forma EBITDA was $24.7 million as compared to $20.6 million in the previous year, representing an increase of 20%. On a year-to-date basis, pro-forma EBITDA expanded 90 basis points from 11.4% to 12.3% of net revenues. Moving on to the fourth quarter, as I mentioned on our third quarter call, when discussing our fourth quarter guidance the fourth quarter was negatively impacted by the typical seasonal increase in holidays and vacation utilized in both the U.S. and Europe which unfavorably impacted available days by…

Thank you, Rob. On the macro economic front, we do not expect much change over the next 12 months. We continue to believe a gradual, but volatile economic recovery is underway and that the existing sovereign debt related issues will continue to introduce greater volatility in our demand environment. The complexity and volatility of the global economy requires organizations to remain focused on improved decision-making and operational excellence. We feel that our offerings are well-aligned with these market conditions. We also continue to expect to see solid demand in the U.S. and international markets that we serve. Geographically, we expect healthy demand in the U.S. and Australia and decent demand in Europe to continue. With that demand overview as a backdrop, let me now comment on some of our strategic priorities. We have always believed that if we can combine our global brand with a series of intellectual capital offerings that are used in a continuous way, we can improve revenue growth along with the predictability and profitability of our operating results. Using unique intellectual capital delivered in an easy-to-use way, coupled with broader transformation offerings would also allow us to increase our client base as well as increase revenue per client. The best example of this strategy has been the revenue leverage we have experienced from our executive advisory client base. As we have mentioned, we worked hard during the last several years to innovate new ways to develop recurring revenue offerings that leverage ERP, as well as great opportunity to serve clients more broadly. In 2011, we covered in each and every quarter the fact that we had initiated the sale of our first 2 SAP and Oracle-based automated dashboard offerings of our new Hackett Performance Exchange with very positive feedback from our clients. This initial marketing communication…

[Operator Instructions] And our first question comes from George Sutton with Craig-Hallum.

I wondered if you could spend a second on the Performance Exchange and just give us an update, Ted, are you happy with the 52 client side? Is that what you were going for and can you be a little more specific as to what you mean by several marketing alliances that you signed?

Well, first of all, George, I think you'd now know me very well, so I always want more of everything and I'm sure all of our associates that are listening on the call would agree with this comment. But, yes, we're happy with the progress that we're making. We're continuing to build that client base. Most of these clients are absolute nameplates, we're getting great feedback from them. So we think if we can maintain this progress throughout the year and get some reasonable renewal rate when clients start actually moving to that paid relationships sometime in the latter part of Q2 and then through the balance of next year that we could, as Rob said, we could start building our revenue base in the second half of the year that would allow this to be neutral to slightly accretive. We have goals for 2013. I rather keep those to myself because anything else will be considered hype and really at this point, I just had -- such a higher level of uncertainty would be inappropriate. But we expect to build this client base and we expect to build a profitable business by the time we get to 2013 around our offerings. Specifically on the alliance front, we've announced the fact that we're working with SSON to help us promote the sale of our offerings. This is a relationship that has started with a promotional activities starting in Europe, but we expect to expand those as 2012 plays out. And then we continue to work very closely with SAP to see how we can collaborate on joint marketing initiatives and we believe that, that relationship and those efforts should help us build our client base through 2012 as well.

Okay. And then relative to your Dutch auction, I'm curious what spurred this idea or interest in doing this. Is it availability of the debt at attractive rates, was it shareholder sale interest? Just kind of curious what was behind it.

The answer is yes, and yes. The fact is that we obviously believe in the long-term prospects of the company, but we also -- when we realized that we could have a facility that we could put in place with what we believe are very attractive terms, and then you couple that with the fact that we also know that we've got some large shareholders, including the one that I mentioned on the call, which resulted from the sale of Archstone Consulting to us that, that could you really, and then in my view, utilize a process like this to get some meaningful liquidity and reduce and/or eliminate any potential overhang risk that any large shareholder may bring. So the opportunity to -- the fact that we have strong cash flow and balance sheet that allowed us to return capital to shareholders, all shareholders, was attractive. The fact that we could hopefully accommodate significant reduction of potential overhang risk for that individual holders, but any large holder, as you know given the volume of our stock, in our mind, created a very significant opportunity that we thought we should take advantage of. So all of those things drove our conclusion. I should say [ph] we also like the fact that we've been strong -- we've had very strong cash flow as you know. We've been buying back stock aggressively throughout the years. So, I mean, those things really allowed us to take a much bigger chunk, at very attractive terms and create a pretty significant accretion opportunity for all continuing shareholders as well. All of those things played into our decision to move forward with it.

The next question comes from Morris Ajzenman with Griffin Securities.

Actually -- I mean, I like the Dutch tender auction here, because the cash [[ph] wasn't helping investors from the perspective of getting returns from that and cash is always good at difficult times, but let me just make sure I heard this right. You said during the presentation, if you were to acquire all stock at $5 million it would be 25% accretive to EPS, is that correct or not?

That's correct. If you took just the 2011 earning and you reduced our denominator by 11 million shares or $55 million divided by $5 right, the high-end of the price, that would provide accretion of greater than 25%.

And that sounds, the assumptions using $20 million in cash and $30 million or thereabouts in the new credit facility, is that correct?

Yes. Up to $20 million from cash on hand and then the balance from the facility, so you can tell our plan is not to draw down on that entire facility.

Okay. So that would mean about $35 million. And my understanding based on free cash flow generation going forward, if you were to drawdown $30 million to $35 million, that would take you between 18 and 24 months internally to regenerate that cash, is that a fair estimate?

That is correct. Short of any, obviously, any other significant use which we would obviously have to go back to our bank for, that is correct.

Okay. Well, and I applaud you on that action. And the second, just a minor thing here. Rob, you indicated into this first quarter a negative impact of $0.03 a share from payroll taxes and vacation accruals. What was that negative impact in the first quarter of last year?

About the same.

About the same. Okay, so -- I don't know if you'd be conservative enough, you have revenues rising to price in $54 million, let's call it -- anywhere in the mid-$55 million range at your midpoint, versus last year first quarter of $53 million and your pro-forma EPS last year was $0.07, and this year you're getting $0.06 to $0.08. Can you just help us understand whether a revenue increase of -- looks like 5%, 6%, 7% EPS at the midpoint would be unchanged versus last year?

Well, as you know our operating leverage continues to improve, but also the growth as Rob also mentioned, the mix will change from last quarter as we are expecting pretty nice revenue growth in The Hackett business that yields a higher gross margin than the tech -- than the ERP business. So the combination of that shift, which is actually Hackett growing and ERP actually going to be down year-over-year, and the SG&A leverage we've built throughout the year, would allow us obviously to operate -- to achieve the higher end of the range assuming that things go according to plan.

The next question comes from Bill Sutherland with Northland Capital Market.

So, Ted, I'm just trying to follow the logical of what you just said on that prior answer. So your -- because I was thinking about that too, I realized there's going to be a little pressure, or maybe more than a little, from the Performance Exchange rollout. Is that the main factor that offsets the natural sort of scale benefits and...

No. We do have a little -- we do have the Hackett Performance Exchange being dilutive in this quarter at a greater rate than it was first quarter of last year, so that is correct. But having said that, when we look at the profitability of the core Hackett business in the first quarter of this year versus last year, our margin improvement -- our margins in that business improved in the second half of the year as compared to the first half of the year and continue into Q1. So just greater operating leverage from The Hackett business is offsetting any reduction in growth in the ERP in the quarter on a year-over-year basis. Those are the dynamics that lead to our range.

And ERP business is down just because?

Oracle business is a little bit slower than it was same time this year and SAP business, which you know, has been just incredibly strong for us is being impacted a little bit by the slow ramp in the quarter similar to The Hackett business. We would expect those businesses especially the SAP business to continue to grow and be profitable, to continue do the improvement -- to really continue to benefit to improvement have made on a year-over-year basis. So -- I mean yes, those are dynamics. As Rob said, we look at all those businesses. We look at an exit rate which is at least 10% greater than when we look at March as compared to the run rate in January on a weekly basis we see that we're going to exit at a significantly higher rate, that creates nice momentum into Q2. If that happens the way we believe than -- similar last year we'll have a pretty nice year on an absolute basis, and hopefully also on a year-over-year comparison.

So on the international revenue, what percentage is Australia now? Is it like 2% or 3% or?

What was that, Rob? I think last quarter was 17% and 4%, so I believe Australia clearly has continued to grow. I don't know if that's -- is it the same -- about the same in Q1, Rob?

It will be.

So it's expected to be about the same mix at Q1.

And what is your feelings of the business outlook in Europe, Ted?

Well as you know, we did have some growth in the European business in the fourth quarter. We didn't yield a lot from that because we were making investments to position ourselves for that growth. As you know when we look at the '08 performance for that European business versus today, there is a big opportunity that we have yet to recapture. We believe we will, but given the uncertainty around the whole economic environment in Europe, we just hate to plan on it, but our demand environment as I said in Europe is decent. We expect to grow that business on a year-over-year basis this year and we would expect the profitability of that business to improve on a year-over-year basis, as well in 2012 as compared to 2011.

At this time, there are no further questions. I would now like to turn the call back over to Ted Fernandez.

As always, let me thank everyone for participating in our quarterly earnings call and look forward to updating everyone when we report the first quarter. Thank you again for participating on our call.

Thank you this does conclude the conference call. You may disconnect at this time. Have a great day.