Welcome to the Hackett Group Third Quarter Earnings Call. Your lines have been placed on a listen-only mode until the question-and-answer session. 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 now begin.

Good afternoon, everyone. And thank you for joining us to discuss The Hackett Group’s third 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. A press announcement was released over the wires at 4:20 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. 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 the call with our quarter overview highlights. I will then turn it back over to Rob and ask Rob to comment on our Q3 operating results, cash flow, and also provide some comments on our guidance. Rob will then it back over to me and I will try to provide some market and strategic overview comments and then we will open it up for Q&A. So let me now start with the highlight or overview comments and start by welcoming everyone to our third quarter earnings call. This was another very strong quarter. This afternoon, we’ve reported revenues of $67.2 million, up 11%, 13% on a constant currency basis and pro forma earnings per share of $0.20, which is up 25%, and both were above the high end of our guidance. Stronger than expected U.S. momentum drove our results as our momentum continued across virtually all of our U.S. practices. Our record results were in spite of weak European results and the unfavorable impact from FX, which reduced pro forma earnings per share by $0.01. Revenue in North America was up 20%, with all Hackett practices up nicely with specifically strong performance from our EPM group. Excluding our ERP group which was essentially flat, our North American business grew over 24%. As I mentioned European performance was weak with revenue down 13% on a local or constant currency basis and down 33% on a reported basis. Our ability to differentiate our capabilities and engage clients strategically with our benchmarking in best practice advisory offerings continues to expand. More importantly our ability to use our proprietary best practice intellectual capital that emanates from these offerings is resulting in increase downstream opportunities to our transformation and EPM consulting groups. This noticeable…

Thank you, Ted. As I typically do, I will cover the following topics during this portion of the call. An overview of our 2015 third quarter results, along with an overview of related key operating statistics, an overview of our cash flow activities during the quarter and I will then conclude with a discussion on our financial outlook for the fourth quarter of 2015. 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 revenues including reimbursable expenses. Additionally, references to pro forma results specifically exclude non-cash stock compensation expense, intangible asset amortization expense, acquisition-related charges and gains, restructuring charges, and assumes a normalized 30% cash tax rate. As Ted mentioned, for the third quarter of 2015, total company gross revenues were $67.2 million, and above our third quarter’s guidance. This represents year-over-year growth of 11% or 13% when adjusting for constant currency. Gross revenues for The Hackett Group, which excludes ERP Solutions were $58.2 million in the third quarter of 2015, an increase of 13% on a year-over-year basis or 16% on a constant currency basis. Hackett U.S. growth was 25%, which was stronger than expected and international which is primarily Europe decreased 23% and 13% on reported or constant currency basis. Hackett Group annualized gross revenue per professional was $396,000 in the third quarter of 2015, as compared to $368,000 in the third quarter of the prior year and $397,000 in our previous quarter. This is especially strong when you consider lower available billing days on a quarterly sequential basis. Gross revenue from our ERP Solutions Group, which consists of our SAP…

Thank you, Rob. As Rob mentioned, as we look forward, consistent with the last several quarters we expect continued growth from our U.S. business across nearly all of our groups. In Europe, we expect the revenues to be sequentially flat, but down on a year-over-year basis, as we see overall activity to be stable but still volatile and with a decreasing foreign exchange impact. We continue to expect one of the key drivers for our U.S. growth to come from the growing leverage of our so called wedge or benchmarking and executive or best practice advisory services. We continue to invest strongly on both of these areas. Next year we will roll out a new benchmarking offering project named Quantum Leap, that will fully incorporate our HPE technology as well as many other enhancements that improve the value we deliver as well as the ease of use to our clients. In Advisory our alliance relationships are helping us invest in new technology that is improving the user experience and access to our content, as well as the capability and insight that we deliver through these best practice programs. Both of these offerings are highly differentiated in the marketplace and provide significant cross-selling leverage for all of our transformation and technology services. Another key driver of our growth strategy has been to continue to expand our market leading enterprise performance management for EPM business. EPM now represents nearly 50% of our North American Hackett revenues. We believe that the combination of assembling a terrific team and our unique ability to leverage our best practice configuration and organizational excellent IP is responsible for the success. Our empirically based insight helps our software partners be successful in positioning the business value of their software when their product is optimally configured, targeting the appropriate…

Thank you. We will now begin the Question and Answer session. [Operator Instructions] Our first question comes from the line of Morris Ajzenman, your line’s now open.

Two questions. first question top ten customers, 27% of revenues. So the concentration on the top ten, even the top five or top class really hasn’t changed over the last year last quarter. How would you summarize -- you’ve talked about it but the growth particularly domestically, what’s driving it? Is it just more confidence, better feeling by your customers to move forward with projects and into initiatives that you’re offering them. Is it any handful of industries that’s driving the improvement? Wondering if you can kind of help us understand how these trends will improve, despite the U.S. economy being relatively sluggish from the GDP perspective?

Well, let me first start by addressing the 27%. You’re right, it hasn’t changed much but what that means is that our revenue growth -- our revenue is growing, and the scale of those top 10 clients is growing with it. But there is no doubt we’re serving more clients but we’re also doing projects, larger projects with clients as well, which leads to the revenue growth. With that said what’s driving demand? Morris, look, for the S&P 500 or more broadly the Global 2000 that we generally serve, growth is hard to come by. People continue -- the U.S. economy, even though that appears to be improving -- we forget but had some volatility in the first quarter as it did a year ago. Clients are starting the year with aggressive revenue growth plans. By the time they get to the middle of the year, they realize that the revenue plans are not going to be achieved, just the overall GDP growth is simply not there. And they’re driving the improved EPS results through productivity improvement, which we play a very strong part in or through some of the things they do in either acquisition or other financial architecture. But specifically to productivity improvements, I think when you’re seeing the kind of growth we’re experiencing, there is no doubt that clients are turning to us for that identification. If you want to relate that to benchmarking or architecture which relates to our transformation capability or business analytics, which report to our EPM capability, across all of those three sectors, I think the Hackett brand and our ability to play this highly respected well branded independent perspective that can be played and then allow the clients then to execute those projects either their own or with a large SI has…

Thank you. One more question and I’ll hop back in the queue. The three joint ventures you’ve discussed in dual in very early stages here. Any sort of report card you want to have us kind of lookout as 2016 unfolds? Any quarter where you think you may have might be able to see traction, where we should be looking for something or should we just let 2016 play out without having any expectations?

Well, I mean we have expectations. I just don’t want it to be guided, because we’re still early on these projects. But our expectation is that we should see our current efforts result in increasing revenue throughout 2016 and that that revenue should come primarily in the shape of multiyear contracts, and that that revenue would then grow on a year-over-year basis in some significant way. So what we don’t know is the extent of the success of each the three ventures. But I tell people that if -- we can say if they all do average, that yields a certain expectation for us or if one does incredibly well and one does average and one really doesn’t do something at all; overall, we would attract Morris, for that revenue to increase throughout 2016, and because it would come in at such a high gross margin and operating margin, to at least be noticeable in the second half of next year and then allow us to layout some kind of growth and margin and operating margin from those activities as we exit 2016. But we hope to be able to share activity that becomes meaningful as we close out the first quarter and we hope that that builds out throughout the year and then through years to come.

Thank you. [Operator Instructions] Next question comes from the line of George Sutton. Your line is now open.

Given the strong results, I wondered if we could peel back the onion a little bit here and talk about number of customers and strength there in the U.S. versus the size of the relationships that you’re seeing. You’re obviously seeing improvements in both. I wondered if we could discuss each of those a little bit more. And I’m also thinking of this relative to some of the market share gains that you might be seeing.

George, we don’t provide that client count or average revenue account, but we can say both -- that we’re seeing, both increased activity in accounts, and we’re seeing the average size of our engagements increase across most of our practices. We don’t have specific counts with you. But they’re both up and then that’s driving increased utilization, as Rob mentioned, that’s also coming with higher rate, not significantly higher. But remember, we used to be in period where those rates were flat to down; now we’re seeing them flat to up, which I think again is attributed to the fact that people are willing to recognize this unique way that the unique information we have to help them make these decisions. So, it’s really improved execution across the board. And unfortunately, no, I don’t have the exact increase in accounts and average client counts, but they’re both up.

Let me turn the focus to Europe which hasn’t performed to your expectations. Can you give us a sense of what you’re trying to do either from people perspective, strategic perspective? Obviously that economy is not -- has not gotten much better but frankly the U.S. hasn’t gotten much better. So, it’s hard to understand the dichotomies?

Well, there’s two significant differences, one, the relative scale of our business, even if you go back a couple years ago, when Europe was larger, is significantly larger in the U.S. as compared to Europe. And the EPM business which we have is probably the most significant one that we have an EPM business which now represents 50% of our Hackett revenues in the U.S. which we’re still just trying to build in Europe. So, when we look at the two -- there’s also one other item which is very, very important. Even though GDP growth in the U.S. is better than it is in Europe, you may point out that in certain economies, it may not be noticeably stronger. But when it comes to client decision-making, a North American or U.S.-based company is clearly more decisive and committed to productivity improvement than their European counterparts. I think the European counterparts, both culturally and also as a result of some of the if you want to call them regulatory, individual countries, social economic rules will clearly differ and not act as quickly and decisively and stay with productivity’s initiatives as we see our U.S. counterparts behave with. So, one, a significant component of the business out there; two, the scale of our business in U.S. is larger than Europe; and three, culturally. U.S. dealt with the financial crisis more aggressively and more assertively, U.S. GDP growth has been stronger, more consistent, and U.S. led companies act more decisively. The combination of these things lead to difference in performance.

Okay, you mentioned your Quantum Leap strategy or Quantum Leap coming up next year. and it sounds like you’re packaging HPE together with your benchmarking. Can you explain how that’s different than how you’re trying to go to market before with HPE, which sounded like it was a little bit more of a specific focus?

Well, HPE still has its specific focus and we sell it as an independent dashboard or where our primary efforts right now are to sell it jointly with the Oracle Business Intelligence Cloud Service platform to leverage Oracle’s large sales force in that business intelligence area. Having said that, what we learned from the Hackett Performance Exchange, and you’ve been exposed to the dashboard is that we believe that our current benchmarking offerings could one, be streamlined so that clients could provide us the information more effectively. We also wanted the clients to take advantage of the automated extraction capability of HPE in our -- or if you want to call it our base or traditional benchmarking offering. So, we wanted to integrate that capability in our base offering. And we also wanted to add some capabilities to our base benchmarking offering that allows clients to perform a benchmark either on a continuous basis even if it’s just annually, or even if it decides to repeat it in some more frequent -- with more frequencies than they are today. But at the end of the day, it’s about delivering, it’s capturing more data, clients submitting data more efficiently, us allowing clients to populate data with more ease, allowing them to update information if they want to re-benchmark more quickly, use full portal and dashboard capabilities to report all of our traditional benchmark information, using the dashboard capability. So, it’s like, I liken this a lot to TurboTax, when I tell people that if you’re a TurboTax user and you started using TurboTax over 10 years ago, you were providing all the data and it completed your tax return. And if you continue to use that capability that quicken product five years ago, you saw more direct extraction and download capabilities that came into that product and really significantly increased the ease of use of that product. We’ve been trying to emulate some of that capability for our traditional benchmark user. So, consider benchmarking a product that somebody can use and run monthly and use it as a dashboard and both measure the event or measure how well they’re trending. But we want to take that technology even for our very large users who may use us maybe every three to four years and we’d like for them to use us with more frequency. We think that that frequency will improve, if we give them technology that enhances their experience significantly, we think Quantum Leap will do that. Our benchmarking services excluding that capability today, as you know over the last couple of years, have been growing very strongly. That’s a result of increased sales capability, but we also believe it’s because by demonstrating the HPE capability, a client can quickly see if they have any doubt that we are the leading global benchmarking organization in the world. We want to stretch that further with the introduction of Quantum Leap next year.

Thank you. Next question comes from the line of Bill Sutherland. Your line is now open.

Hey. I wanted to -- you’re going to hate this question, but I wanted to just see if you guys could think out a little bit about the way that CIMA, Oracle and ADP begin to influence the numbers. Two of them, as I understand it are simply going to be almost like a licensee kind of model, Oracle and ADP. And then on CIMA that’s more of a traditional joint venture where you’re reporting your share of the financials. And so, because this just impacts kind of how the model starts to lay out as these things begin to take on any sort of size. And so, I guess -- I mean you’ve got the sales engines turning over now, I guess in all three, and some sort of sense of order of magnitude or anything as far as how this is going to start influence the earnings statement?

Well, let me see if I can give you some information on all three and see if that helps you with the response you’re looking for. So number one, the ADP relationship, as you know, that includes a contractual guarantee, every time the ADP Vantage HCM product is sold with anything other than the -- with any other module other than the payroll module, our Hackett best practice advisory program is sold along with their software offering. And as soon as the contract is signed and the client starts paying ADP, we get our share of that every month. So, we would expect for us to -- as the pipeline builds, we would expect to bring the clients on to build as these clients -- as we build this pipeline which we started to build with them here in the middle of September. So, we would hope to be able to see some revenue, some revenue even in Q4 but hopefully something, more meaningful as we get Q1 and before. But as you could imagine, Bill, these are 3 or 5 year contracts. So, this -- a new client would build on another, so this should grow throughout 2016 and beyond, if our relationship is -- if successful, the way we hope and believe it can be. So that -- I’ll call the cadence of that the numbers of clients that they signed and the size of those client will dictate how quickly that ramp takes place. On CIMA, CIMA is a little trickier in that -- our vision is to sell companies, a full curriculum for their shared service for GBS professionals. But right now, we only have one of the three product offerings that we’re showing them that we will have. We have the -- as we said…

And Ted, sorry to interrupt you, but that’s going to have an impact -- that’s going to be more of a traditional, like you’re utilizing your sales group in part?

In part for CIMA, yes.

So that will have sort of a traditional ripple effect on your P&L as it builds as opposed to the other two that just dropped down for the most part.

Well, it’s interesting that you say that but yes, we’ll have higher sales expenses for CIMA. But I hate to get into the details of how the gross margin difference would be for CIMA versus the other. I don’t want to get to that level of detail.

Sure I understand.

Suffice to say though, suffice to say that the gross margin and operating margins from any ramp up from these three offerings since the HPE depreciation is already in our P&L since the beginning of 2004, will be substantially higher than any gross margin or operating margin we would have from any of our existing offering.

That goes without saying.

That’s right. So, let’s just say, even small amounts of revenue, since that operating -- this gross and operating margin would be high, after some period of time, should become noticeable to our P&L, once and/or if they ramp up, let me back get ahead of myself. So, it’ll be hopefully by the time we report the first quarter, we’ll have some cadence or ramp up, so that we could then provide some -- a better idea of what the 2016 number would be. I would hate to try to do that prior to the first quarter of 2016 quarter plays out.

So, I’m just curious, if you were to just sort of estimate the size of your recurring revenue today and it’s -- you can be pretty precise actually because I’m thinking it would include executive advisory and then your AMS or EPM, SAP and Oracle, what it is they come to know?

As Rob mentioned in his comments, 16% of our revenues come from our AMS and executive advisory practices today and it represents 21% of the profit contribution from those practices, as it relates to the total company’s performance. So first of all, I think one, it’s important to note that this was a negligible number 24 months ago and now this number is up to 21%. Our hope, right, in a perfect world, if we could have these new ventures kick in and they come in with higher gross margins and operating margins, it’d be nice to see that percentage of total profitability relating -- that relates to recurring revenue, not only increase as it relates total but also see that come in at higher gross margins and operating margins, so that even with smaller revenue growth and on absolute basis, we would see higher percentage of total profitability come from recurring revenue and from these IP based services, as we go through ‘16 and hopefully increase into ‘17 and beyond.

Thank you, sir. And we have another question coming from Jeff Martin. Sir you have an open line.

Could you give us an update on your progress with building EPM in Europe? I know that’s been a multi-quarter initiative and you spent key personnel over there to spearhead it. Just curious the progress you’ve made and what your expectations are for the next couple of quarters in terms of progress, and if it’s more complicated than that, maybe kind of high level help us outline what exactly it takes to get that and start to gain more traction?

I would say that progress to-date is disappointing. Having said that we believe that we’ve put the right people in place for us to build that EPM capability in Europe. We’re bidding and we’re competing, and doing more EPM work than we were at the beginning of the year. What we need are for those opportunities to move from assessment to some nice implementation work that allow us to scale that business. Without that sequence, we’re not going to achieve the kind of results we want. So, I would say, disappointing to-date, but staying all over it, believe it should be an important part of our European business and we expect to build it out. Having said that, I worry about commenting on Europe because I don’t want to talk about Europe as being -- there’s no doubt that Europe is a more difficult marketplace than the U.S. marketplace. If I look across virtually, all industries with very few exceptions, all of our large clients see the same, I’ll call it -- have the same experience that we’re experiencing. So, we’re just mirroring what our clients are experiencing. Having said that, Europe was significantly larger, as a percentage of total for us four years ago. We see no reason why it should not return to that. Our commitment to the region and especially since we serve a global client is undeterred by this. We operate profitably from Europe but we know that, boy, would we love to see our current result and our guidance if Europe had been flat to up the second half of the year. I mean our results are incredibly strong. And as I said, this is in spite of weak European results. So, we’re not where we want to be but we expect to improve it as we get to ‘16. Will we plan on improvement, as we speak to the Street or try to think of what our prospects are? No. But do we expect for Europe to perform at levels more commensurate with the ones we were experiencing four or five years ago? Absolutely. And it’s just a matter of time before either A, some combination of stronger GDP growth, I mean let’s see how their stimulus really impacts the consistency of that marketplace performance. I know that we’re prepared and we are making the investments to see that return. We’re not going to give up. It could be material for our current operating performance. So, we know the opportunity is there and we know it’s just a matter of time before we capture it again.

And then was curious if you could touch on your alliance partners and how those essentially act as sales channel for you, do you expect that from [indiscernible] or is that particularly more related to Oracle?

Well, first of all, in the ADP side, the channel is entirely theirs and we’re just available for support the calls that they would like for us to support. And part of our program is to work with them when we can to make sure a client understands the value of this Hackett capability that’s now being offered with them. So, a very large sales force, a very committed organization. As I said, the feedback from clients and sales force is very favorable. On CIMA, currently we’re from this, I call it early activity, I want to remind you that we didn’t actually finish training until I think the third week of September, so let’s say we’ve got six weeks into this. But right now, about a third of the pipeline opportunities are coming from CIMA, two thirds from us. And I would expect that our opportunities, as we look at it, we expect our opportunities as we engage large clients and we complete the offerings, to be significantly greater from a dollar basis, as we fully roll out the curriculum. But highly collaborative, doing all the things that you’d want to do and with a start up capability like this that CIMA’s a phenomenal organization, we think we picked the a terrific partner. And then on the Oracle side, again the product is being taken by Oracle through their BI channel. We now support those sales calls to the extent we want. I would say that when I look at the activity today, perhaps a quarter of the activity is coming from us and three quarters of the activity that we’re pursuing is coming from them. And that one is just too early to call, but as I mentioned we hope to be able to provide some sales activity as we exit the year and speak to the fourth quarter when we present our annual and quarterly results.

Okay, great. And then could you touch on the wedge offering from a high level? How does that affect the sales process; how does it translate into opportunities and conversions from that pipeline and how do you see that evolving over time?

I think one of the things that we learned is -- you’ve followed us for a while, even though you started covering us a couple of years after you met us and started kind of getting to know our business model. But as I told you, one of the things that I think we did wrong coming out of the financial crisis, is that we discounted and cannibalized our benchmarking sales activity at the expense of trying to drive higher revenue growth. One of the things that we think is critical to our current success is that about, I don’t know, I’m going to say as we were rolling out the initial HPE product but maybe a couple of years ago, we clearly decided and understood that benchmarking growth and data growth meant higher growth to the entire business and specifically our transformation business. So, we think that the rollout of HPE helped us peak and reintroduce our benchmarking offerings and speak that just how differentiated we were. We think that had an impact increasing to sales force in that in benchmarking, has also been paying off for us and benchmarking has been growing as far as any group here over the last couple of years. And we’re seeing the benefits of that. And it’s with these marquee clients that really want to make whether it’s post merger decisions or drive productivity decisions, more precisely they just know to turn to us. And we hope that both by showing them that we give them alternatives on how to do it with HPE, if they want to monitor that on a quarterly basis or what they’ll see next year when we launch our project Quantum Leap, which will allow them to use our current offerings, again more easy and with better…

Great and then last question on the alliance side, not to be greedy but do you foresee additional alliances over the course of the next year?

Do I see additional ones? I am working my tail off to have additional ones. I think if anything what I’ve seen from these first three offerings is that we can help a large software company or a large e-learning company and who knows what the idea will be next to differentiate and our extend value. So, I am working feverishly to identify what those opportunities are and introduce that capabilities to those companies. So, I will say that yes, I will personally be disappointed if we don’t introduce additional alliance partners in 2016.

Thank you. At this time, I show no further questions. I would now like to turn the call back over to Mr. Fernandez.

Thank you, operator. Let me thank everyone again for participating in our third quarter earnings call. We look forward to updating you again when we release our fourth quarter and annual results, sometime around mid-February. Again, thank you for participating.