Welcome to the Hackett Group First Quarter Earning Conference 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 begin.

Thank you, operator. Good afternoon, everyone and thank you for joining us to discuss The Hackett Group's first 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, Robert Ramirez, CFO. A press announcement was released over the wires at 4:05 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 welcome everyone to our first quarter earnings call. As we ordinarily do, I will open the call with some overview or highlight comments on the quarter. I will then turn it back over to Rob and ask him to comment on detailed operating results, cash flow and also provide our comments as well as the guidance. Rob will then turn it back over to me, so that I can provide some market and strategic overview related comments and then we will it open it up to Q&A. So again let me start with the overview and highlights, and again welcome again to our call. This is another very strong quarter. This afternoon we've reported revenues of $68.8 million, up 13%, and pro forma earnings per share of $0.20, up 25%, both at the high end of our guidance. The results are even more impressive when you consider that our pro forma EBITDA was up 32% and the reason our EPS increase was tempered was due to an 11% increase in weighted average shares outstanding resulting from primarily divesting of performance-based stock appreciation rights and the impact of increased share price on our weighted average share calculation. Consistent with all last year's strong U.S. demand drove our results as our momentum continued across virtually all of our U.S. practices. Our record results were also in spite of weak European results. More importantly this momentum carries on to Q2 guidance along with a favorable indication that European results could now be stabilizing. Revenue in North America was up 30% which continues the trend that goes back to 2014, with all Hackett Practices up nicely and with continued strong performance from EPM, or Enterprise Performance Management Group. As I mentioned, European performance was weak with revenue down 19%. As…

Thank you, Ted. As I typically do cover the following topics during our call. In overview of our first quarter results along with an overview of related key operating statistics. I'll do an overview of our cash activities during the quarter, and I'll then conclude with the discussion on the financial outlook for the second 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, and assumes a 30% long term cash tax rate. For the first quarter of 2016, total company's gross revenues were $68.8 million, and above our first quarter's guidance. This represents year-over-year growth of 13%. The impact of foreign currency was less than half of a percent and was immaterial to the quarter. Gross revenues for the Hackett Group which excludes ERP Solutions were $57.9 million in the first quarter of 2016, an increase of 12% on a year-over-year basis. Strong Hackett U.S. growth of 21% more than offset international revenue declines primarily from Europe which decreased 19%. Hackett Group annualized gross revenue for professional was $383,000 in the first quarter of 2016, as compared to $374,000 in the first quarter of 2015, and $366,000 in our previous quarter. Gross revenue from our ERP Solutions Group which consists of our SAP reseller, implementation and application managed services groups or AMS. Total $10.8 million, an increase of approximately 16% on a year-over-year basis. Total company international gross revenues accounted for 13% of total…

Thank you, Rob. As we look forward, let me take a moment to speak more broadly about the demanding environment that we have been experiencing and more importantly that that maybe emerging. The rapid development and move to cloud along with the extended mobility functionality being introduced into the marketplace by software and technology providers is going to dramatically change the way businesses compete and deliver their services. This will disrupt the entire industry at an accelerated pace forcing organizations to fundamentally change and adopt these new capabilities or become extinct. The most obvious example is Uber, but you're seeing many other examples emerge that will fundamentally challenge traditional business models. The speed of change will only be limited by the ability of technology providers to deliver on their promise. But regardless of their delivery limitations, the mere threat or opportunity will lead to one of the most significant enterprise transformation periods of our lifetime. This will redefine traditional sequential and linear based business models and activities to fully network and dynamic automated workflows and events with enhanced analytics that will finally deliver on the promise of predicted analytics and artificial intelligence. This so called digital transformation is very attractive to our organization since we believe our clients will increasingly turn to us to provide them with best practice insight on what technology can actually deliver, what changes in business models will actually work and will justify the significant investments that it would take. On a near-term basis, we expect continued growth in Q2 from our U.S. businesses across nearly all of our groups. In Europe, we expect our revenues to be sequentially up and flat to up slightly on a year-over-year basis. We continue to expect one of the key drivers for our U.S. growth to come from the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question is from Jeff Martin from ROTH Capital Partners. Your line is now open.

Thank you. Hi, Ted. Hi, Rob.

Hi, Jeff.

Hi, Jeff.

Could you expand on give us a look at how the transition of incorporating HPE into the core platform happens, over what timeframe and is there a transition associated with that, what's the go to market strategy with that?

All of the HPE, HPE will continue to be sold as a standalone offering and currently through the relationship with Oracle. Having said that, over the last two years, we have been working to integrate all of the innovation that came from HPE into our base benchmarking offering. And a project that we have called quantum leap, to give you our internal name. And this is a way to basically, to really transition our benchmarking offerings into the digital era, to really facilitate data capture, capture data, provide analysis, provide access to all of the insights that we provide electronically. So it's to really migrate our offering in our most critical offering which is our benchmarking solutions, really, into the digital era. So our belief is that our clients will see that new offering in the beginning of next year. We think this will facilitate and increase the interface for clients. It should allow them and create a status for them to benchmark with us more frequently, to access our information more readily, to update their information with us more easily. So as you know the core to our intellectual property starts with the fact that we have a benchmarking offering that is second to none. The client share information about their performance, the level of granularity that no other organization has. From that granularity and that benchmarking insight, we then as we say, look under the covers and understand how companies are leveraging software, the way automated work flows are changing and the way organizational changes are taking around that leverage of technology which then becomes the best practice insight that we're now sharing in our IP as a service alliance. So we think the transition should be a meaningful one for us, relative to our ability to gain more insight and work with clients more efficiently. Hopefully that will encourage clients to benchmark more frequently and to continue to allow us to gather more data, have more insight and be able to serve them more strategically.

The long term benefit of that, do you see that shortening the sale cycle or increasing the revenue per client, what do you think of that…

We think that will allow us to sell more benchmarks, deliver them more quickly, capture more data and as you know if you really go back to 2014, we believe that the more benchmarking that we do and data that we capture and granularity to help us drive insight that's unique to Hackett. The smarter and brighter that we are as we then engage clients and share our IP. So I think it strengthens the organization at its core. I think it facilitates our ability to increase the benchmarking revenue, but more importantly to gather more insight, share more insight which have really helped both downstream revenue and the IP as a service businesses that are so critical to our future growth and profits.

Okay, and then could you share some insight on the drivers of the sequential improvement that's expected in Europe? Is there anything internal or external that's driving that or is it more of a low hurdle from last year?

Well, first of all the comps are more favorable. But if you wanted a driver which in my script my COO actually encouraged me to put in so I will tell you, I mean our benchmarking activity has been increasing over the last 3 quarters and we have always believed that's an early indicator and that activity appears to be driving some of the improved results that we are now expecting in Q2. I didn't want to, as you know I have been very cautious to talk about the turnaround in Europe. We are happy it's going to be stable, slight up on a year-over-year basis and we hoped that an early indication that comes from our bench marking and wedge offering is a good long term indicator but we will continue to see that it holds for several quarters before we sneak to it more aggressively.

Okay. My last question and then I will get out of the way of people. On the global delivery capability build out is that more for existing US clients or are you seeing international demands there and what does it build out to?

Oh no, international is international so whether we are engaging a large multinational in the US or in Western Europe, I mean these are clients that have half of their operations in their rest of the world. So no, look our benchmarking and data. So we want to have global delivery capability that matched the benchmarking capability and research and best practice insight capabilities, that's why we continue to look for ways to invest and improve the European performance because we do believe it helps the delivery of services that we have to International clients.

Great. Thanks a lot guys.

Thank you. Our next question is from Maurice [ph] from Grisham Securities, your line is now open.

Hey Tedd, you discussed with physical lines that you have in place first the VP, then the senior [ph] it's in the second half of this year and when I see anything I mean the impacts on the income statements?

Well, first of all it's already having an impact on an incremental basis but as you know these clients, these contracts that we are signing on all of the alliances are primarily multiyear clients which amortized over a period of time. As an example the majority of the contracts that we are signing with ADPR are five year contracts. Where we originally thought they would be three, to give you some idea. But we have been cautious not to comment the impact in Q1 and Q2 are just not material for our results. I want to continue to speak of the facts that the activity of ramping, the revenue is ramping and if it continues to ramp the way we see it and expect it to be throughout 2016 out exit run-rate in 2016 that we will have something that is noticeable in 2017. In the event if it materializes sooner, obviously we will take it. But our focus is on extending the capability, making sure that we are launching all these things correctly so that the ramp happens and that we get to see it materialize in 2017 the way we believe today. so the answer is yes, our materials don't know but the focus is on the ramp so we know that it is noticeable in 2017, so that continues and that's why I tried to provide some comments around number of pilots we are launching and see how that's increasing meaningfully. And we are expected to continue to increase too and how the ADP relationship continues to get high marks and how we now expect for our opportunity for an ADP to expand as they launch their next fiscal year and this would start in this coming summer. So again, things are progressing well and we have always been more modest and cautious about the HPE alliance but we are very bullish on our opportunities with ADP and CIMA as we are bullish on the fact that we would like to have other software partners added to our alliances before the end of the year if possible and we would like to introduce other certification offerings in areas outside of shared services and also if we can before the end of the year with other alliance partners.

Are you allowed to discuss how many clients you added with ABP in the quarter?

I cannot.

Okay. One last question before I get back in queue. I want to make sure I heard this right. Did you say recurring revenues were 50% of revenues or 15%?

50%. Our revenue per client on the top 20 has just expanded very meaningfully here over the last few years.

So recurring revenues is 1.5 times of total revenues?

No, go back sorry I may have misheard your question. I may need to ask you to your question again.

Recurring revenues as a percent of all revenues?

Current recurring revenues is 15% revenues, 18% of profit.

Okay. Thank you.

Thank you. Our next question is from George Sutton from Craig Hallum, your line is now open.

Thank you and 50% would have been very impressive. Yes, there would be an evaluation change. So, relative to the wall of share discussion that you had, it certainly is impressive what you have been doing with your top 20, can you talk a little bit more specific in terms of some of things you are doing there, relative to that wall of share, what's driving your top 20 number and can you give us a sense below the top 20. Are you seeing the things dynamic?

Well, first of all the important thing goes back to the comments I made in my strategy and overview comments. That there is a the clients are fundamentally having to rethink the way they currently operate their businesses and at the heart of that is the leverage of technology and you organize around that and at the heart of that is the opportunity for Analytics and information delivered in a manner and to a point that would dramatically change and improve the way businesses are run. Well George those two things are at the heart of our business so we think that this is a significant and secular change coming with divisional transformation era we are talking about. We want to cautious not to start changing the long term growth strategy of the organization but as you know we have been growing at the upper side of our revenue side for a while. And we are looking at it and saying look companies need transform where and how to place those bets is becoming increasingly important and understanding what technology can deliver and to gain that value is critical and that's at the heart of the way we benchmark, research, deploy best practices, do our business transformation business. Analytics is at the heart of the way clients, cloud and all of the new technology that is impacting our clients lives is growing and dramatically improving, active to information and analytics for organization and leads to the desire to drive the meaningful performance predictability and officially our intelligence and investments we have made in EPM and business analytics is at the core and I think that is the activity that we are experiencing. We are really happy we are in the heart of this transformational opportunity but we are probably excited…

Got you. So I have a few questions on this buyback of Insider shares, I just wanted to give you a formal explain kind of the size, the pricing, the timing, any advisory's you may have used to help you from a legal perspective, any sense there would be helpful.

Well the answer is that when we guided the first quarter we knew that the stock appreciation rights had been earned. And we knew that that would drive increased dilution to our first quarter results and guidance. We also know that the increase in share value has an impact on the weighted average share calculation and also increases that number of weighted average shares outstanding and we were looking, we were thinking about that, listen, we've always said that we would use cash to acquire as a priority to buy back stock and to increase dividends to our shareholders. We had increased the dividend to our shareholders at year end significantly, 30%. We continue to look for acquisitions but as you know, a lot of the people who cover our stock, it has been rumored and commented that one of our larger shareholders had been moving out of their position here over the last several quarters and in fact, I think shortly after the end of the first quarter said that they had actually sold their entire position, I mean this was our single largest shareholder, just 18 months ago. And when we heard of that activity and saw it in their filings, I encouraged all of the banks who cover us -- to the extent that those shares became available that we would be interested in seeing if they wanted to share that with the company or they would be shared with new shareholders. We didn't know -- we actually meet with this large shareholder before the end of the quarter. We encouraged them to the extent that they plan to sell out of that position that they would offer that to us, they never reached out to us. I'm sure that I have a new meaningful shareholder that…

Okay. I appreciate the details. Thank you.

No, I appreciate you asking the questions.

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

Let me again thank everyone for participating in our first quarter earnings call. We look forward to bringing you up-to-date again when we report the second quarter. Thanks again.

Thank you for participating in today's conference call.