Welcome to the Hackett Group Fourth 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. Robert Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin.

Good afternoon, everyone and thank you for joining us to discuss The Hackett Group's fourth quarter and full year 2015 results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of The Hackett Group, and myself, Robert Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4:42 PM 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. And thank you, welcome everyone to our fourth quarter earnings call. As we customarily do, I will start the call by trying to provide some overview or highlight comments relative to our quarter, and also some comments about our annual results. I will then turn it over to Rob and ask him to provide a really detailed review of operating results, cash flow and also our guidance. Rob will then turn it back over to me, I will provide some market and strategic overview comments and then we will it open it up to Q&A. So first let me start with the highlights, and again, welcome everyone to our fourth quarter earnings call. This was another very strong quarter. This afternoon we've reported revenues of $66.4million, up 10%, 12% on a constant currency basis and pro forma earnings per share of $0.21, up 23.5%, both at the high end of our guidance. Continued, strong U.S. demand drove our results as our momentum was really experienced virtually across all of our U.S. practices. Our record results were in spite of weak European results and the unfavorable impact of FX which reduced pro forma earnings per share by $0.01. More importantly, this momentum carries onto our 2016 fiscal year, and more specifically our Q1 guidance. Additionally, we will use our strong cash flow to increase our annual dividend by 30% to $0.26 in 2016. Let me provide some operating details. Revenue in North America was up 18%, with all Hackett practices up nicely with specifically strong performance from our enterprise performance management or EPM group. Excluding our ERP or SAP implementation group which was essentially flat, our North American business grew 23%, representing the second quarter in a row that our U.S. business has exceeded 20% revenue growth. As…

Thank you, Ted. As I typically do, I will cover the following topics during this portion of the call, an overview of our fiscal 2015 results, as well as our 2015 fourth quarter results along with an overview of our related key operating statistics. I'll also cover an overview of our cash flow activities during the quarter and I will then conclude with a discussion on our financial outlook for the first quarter of 2016. 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. Before I move to the fourth quarter results, I'd like to discuss a few highlights regarding our annual results for fiscal 2015. Annual revenues total $261 million, an increase of 10% and 13% in constant currency over the prior fiscal year. Pro forma earnings per diluted share were $0.75 in 2015 as compared to $0.56 in 2014, an increase of 34%. The 2015 fiscal year results were negatively impacted by approximately $0.035 due to foreign currency fluctuations. North American revenues were up 14% with international revenues down 8% for the fiscal year. Pro forma EBITDA for the fiscal year was $37 million, an increase of 34% over the prior year, this also represented 16% in net revenues, a 280 basis point improvement from fiscal 2014. During fiscal 2015 we continued to utilize our strong cash follow to return capital to our shareholders. We declared dividends…

Thank you, Rob. As we look forward and consistent with fiscal 2015, we expect continued growth in Q1 from our U.S. business across nearly all of our groups. In Europe, we expect the revenues to be sequentially up, but down on a year-over-year basis. We expect European 2016 performance to stabilize throughout the year, but we will not plan on this improvement until we experienced and reported for several quarters. We continue to expect one of the key drivers of our U.S. growth to come from the growing leverage of our so called wedge or benchmarking and best practice advisory services. Our benchmarking and best practice advisory offerings are highly differentiated and also provides significant downstream cross selling leverage to our business transformation and technology consulting groups. We continue to invest strongly on both of these areas. In 2016 we plan to roll out a new benchmarking offering that will fully incorporate our HPE technology and other innovations into our traditional benchmarking platform that will improve and further differentiate the values delivered through our benchmarking offerings. In Advisory, our alliance relationships are helping us invest in new technology and offerings that will improve our clients' access and leverage of our proprietary insight that we deliver through our best practice programs. Another key driver of our growth strategy has been to continue expand our market leading, enterprise performance management or EPM business which now represents nearly 50% of our Hackett revenues. We believe that the combination of assembling great talent and our unique ability to leverage, our best practice configuration and organizational excellence IP is responsible for this success. Our ability to use this capability to help our software partners uniquely positioned the business value of their software when their product is optimally configured targeting the appropriate analytic and using our…

Thank you. We will now begin the Question and Answer session. [Operator Instructions] Our first question is from George Sutton from Craig-Hallum. Sir, your line is now open.

Thank you. Nice results guys. And frankly, even more impressive I would say would be Q1 guidance, and knowing you have liquidity for conservative guidance and knowing that Q1 is generally or seasonally a slow quarter simply from an EPS perspective. Can you give us a sense of kind of what's driving this confidence? Was it just continuation of what you saw in Q4? Is there something that's changing in Q1?

George, first, thanks you for your comments. But it's simply, not only the way that our fourth quarter played out, but actually how we completed the quarter. I mean our momentum continued right through the end of the year and that carries into the New Year. So it gave us the level of confidence to provide that kind of guidance, and it's important to know that that kind of EPS growth that Rob mentioned is based on 2% to 3% more weighted average share dilution, so it means that we would be guiding even on higher operating results to meet those EPS targets in the first quarter.

So, your one frustration, or I'm sure you have more than one, but the key frustration has been Europe and I know you've made some management changes, made go to market changes, obviously it hasn't yet had a real impact. What is the thought process there? You mentioned it maybe several quarters before we start to see any real growth on that market.

First, I would say frustration is not a word that I use. You've known me long enough to know that I guess the first thing I would comment relative to Europe is that we're incredibly persistent and rarely give up. The European marketplace has been a highly profitable marketplace for us, and yes it's significantly underperforming from any of the highs that we experienced in the '08 timeframe. But having said that, we still believe that the key is to more closely mirror the capabilities of the U.S. in Europe and to add scale. So we're continuing to higher and focus our efforts on those capabilities that the European region have not had. We're also cognizant of the fact towards that -- look, the European marketplace is not nearly as active in generating the demand in general to our competitors or to the clients that we serve. So we want to do it. We think that the opportunity for improvement still remains -- is still there for us to have it and to recapture it, and as I said in our comments, we expected to improve in '16 but none of our financial plan will count on it until like we've said we've seen it for few quarters and have reported it, and we're actually able to share it with you. So we remain cautiously optimistic and we'll continue to look for ways that talent and capability to bring that performance back in line with what it should be which is up significant even to our current operating results.

Okay. And then one last question, just to bridge some timeframe. So you mentioned the Oracle, CIMA and ADP relationships and mentioned that there are some customers and some modest revenues initially that you maybe seeing. You also mentioned in your prepared comments that this IP as services alliance could redefine your business model over five years. Could you sort of bridge the gap as to when it becomes more significant in your mind?

We do expect, even though we're not again in our 2016 financial plan are not counting on it but we do expect for revenues across these three alliances to ramp throughout '16 and to be noticeable in the second half until the noticeable operating results in 2017. So -- now look, in the cases that the offerings can grow, even though it varies by the specific opportunity, the three specific opportunities that I've mentioned. We feel -- we still believe very strongly that these are significant opportunities that not only come with recurring revenue but at significantly higher gross margins that are then -- than we have in our existing business. So no, I think hopefully that provides some color which we would expect it to ramp. It is revenues that required you to sell the deal right before than you have that recognized monthly for all three of the offerings. But we would expect that to start accumulating, and as I said noticeable and then become meaningful in 2017. I mentioned in our last quarter that we would have an indication of ramp by the end of the first quarter; we still believe that because we see the pipeline activity developing. So once we get a better idea of how that closes and when we actually get a chance to start recognizing revenue I think we'll be able to provide that insight. I think specifically to the CIMA offering, which we say we're getting a very favorable reaction but that we're only adding the entry level instead of the complete entry, managerial and executive level. We don't believe that in CIMA we'll get to see the real benefit of that ramp until all three courses are out which won't be until July. But even for those programs, by the end of the first quarter we'd like to be able to tell you that we've got a meaningful number of clients in pilot programs and that the response for those clients is favorable and that as we build out the programs, then the amount of spend or the amount of -- in our book overtime, the amount of their total training budget for these shared service and global business service centers becomes meaningful. So it's just a nature of a new venture, new channels and then the way the revenue ramps, closes and is recognized. That requires some time for us for it to become significant.

Perfect. Thanks guys.

Thank you, George.

Thank you. [Operator Instructions] Our next question is from Jeff Martin from ROTH Capital Partners. Sir, your line is now open.

Thanks. Hi Ted, Hi Rob.

Hi, Jeff.

Ted, you mentioned some new benchmarking offerings in 2016. I was just wondering if you could elaborate on that and what has been the catalyst for driving those new offerings?

Without giving away too much -- because our benchmarking team wants us to be properly launched but look, we've learned quite a bit around how to create a dramatically stronger user interface, how to capture data, repopulate data and even more importantly, when you think of The Hackett performance change, Hackett extract data directly from client systems in order to populate the information that we want to gather from clients when they go through a benchmark. So the initiative that we have had now for over a year and that we hope to be able to formally launch as second half next year would bring all of the extraction capabilities, user interface improvement, reporting capability, the focus on the nature of questions, adding more content around the nature of the best practice inside matrix that we can leverage. I mean everything that we're learning, not only from The Hackett performance exchange experience, but even some of the learnings now from our offerings that we are driving to some of the new alliances. Our things that we believe will be incorporated and allow us to come out with a new generation of benchmark, capabilities and platform that in our view we think our database and the comparisons are unmatched and already create a highly differentiated offering from any of our -- I'll call it propose or suppose competitors. We think that launching this will just further define us as to clear market leader in enterprise benchmarking globally, unless somebody is working with any of our knowledge, we're just going to create greater distance and allow ourselves to capital matrix and best practice insight which drives all these things that were leveraging into these new channels and IPO as a service. So it's a continuation -- Jeff of the investments we've been making for years, and then the learnings that we getting from these new offerings and relationships. And really, it's no different than our clients, we're taking all of these knowledge and we're thinking and rethinking at all in the concept of this new digital era which allows us to really rethink of the network effect of constituencies, not only clients that are providing that data, where we gather data, how it's supported. It's really the same thing that we're asking clients or trying to help clients rethink relative to their business model, we're applying it to our own. Again, we think it will be clearly distinct and further differentiate Hackett and allow us to further expand our brand and allow us to further develop new IP at the service offerings that will go through new strategic channel.

All right. Can you expand on your comment, efforts to strengthen the global delivery capabilities, is there something specific driving that? Is that something that has been overlooked for a while or something that you are just seeing as strength from your client basis is kind of pointing you to do that?

I think we've recognized that we have data inside and talent that's really unique to our organization but when you think of our competitors, they are significantly larger than we are. So we're cognizant of the fact that we need to be able to not only provide really smart insight but it needs to be in the global context in which we engage the men. So when we think of global delivery capabilities, it's the combination of what data we capture, how we leverage that throughout our IP-related offerings but it's also -- this relates also to the international expansion. And the fact that just take Europe as an example. It's not overlooked, we'd love Europe to look, to have the scale and capability of the U.S. model. But if we did that without doing that under the right demand environment, we simply would -- we would just be blowing away a lot of profitability that our shareholders and everyone is benefiting from. So it relates to, we want to be -- we'd love to be bigger, we'd like to be able to replicate the U.S. capabilities in Europe, and clearly we want to continue to gather more data, more broadly from these global companies that we serve to allow us to simply be smarter and have better ideas than our competitors.

Okay. And then, I didn't catch specific comments on the macro climate within the client base. I mean I would imagine you'd get some pretty good intel in terms of what people are thinking about in terms of the global economy and also the U.S. economy. Could you give us kind of what you're hearing from your client base? Your results wouldn't suggest any slowdown but just curious what you're hearing from them?

Yes, and I'll speak to what it means to our results but more broadly let me first speak for the macro. I mean, look, without a doubt that there are lot of macroeconomic events that are driving volatility that are challenging many of our clients and that goes to not only geopolitical instability to the incredible reduction of volatility and commodity prices. And the fact that whether people want to hear it or not, the stimulus that has been driven in through the U.S. economy and now has been -- is now being driven into Europe, and China, and Japan, I mean just follow all the Central Banks, has not had a significant impact in global growth. So people know that China is slowing. For us, look, we believe they've been slowing for a while, and that if you want to call it -- people are simply adjusting to, I believe growth that was already decreasing or more muted. If you really go back to even early '14, I think we're simply is acknowledging and reporting what people were speculating as we got to the second half of 2015. Japan continues to struggle growing, right. We've been struggling to even deal with any rate increases in the U.S. because of the fragile nature of the U.S. economy. And look, the U.S. economy is critical to entire global growth and I really think that Fed will be more cautious to make sure that we don't ruin the kind of impact that we're seeing in the U.S. in terms of demand, as well as the impact that it has globally. And in Europe, I mean, I think ECB has done everything it can to drive that European economy but if you look at the growth rate expected in that region, I mean,…

Thank you, Ted, and thanks for taking my questions.

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

Well, let me again thank everyone for participating in our fourth quarter earnings call and the summary of our annual results. And again, let me simply close because of the nature of the year by simply congratulating our entire team for their performance and I hope this momentum continues throughout 2016. Thank you for participating. We look forward to catching up again when we report the first quarter.