Welcome to the Hackett Group First Quarter Earnings Conference Call. Your lines have been placed on listed only mode. [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 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, Rob Ramirez, Chief Financial Officer. Our press announcement was released over the wires at 4:14 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 Q&A 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. This afternoon, we reported revenues of $71.4 million, up 4% or 5% when adjusting for constant currency, and pro forma earnings per share of $0.23, up 15%, which came in at the midpoint of our guidance. On a net revenue basis, we were up 5% and 6% on a constant currency basis, as our pass-through client reimbursable expenses came in lower than planned. Our U.S. revenues were flat with last year versus our expected 2% to 4% increase as demand was more tempered than expected. This decrease in demand in the U.S. was partially offset by stronger than expected European results, which were up over 35%, led by our strong European EPM performance. As we have been articulating, the digital transformation era brings great long-term promise, but it also comes with near-term market disruption, as our clients assess the technology providers' ability to sell and deliver on the desired functionality, security and performance of emerging cloud applications. Cloud application considerations also affect our client transformation initiatives, given the organizational change driven by these new technologies. The accelerating transition from on-premise to cloud applications and the increasing consideration of robotics process automation, or RPA, led us to move to a more aggressive acquisition of alliance strategy to address these market changes. To ensure we stayed at the forefront of these emerging market opportunities, we acquired Jibe Consulting and Oracle Cloud on the Oracle Cloud side, and we acquired Aecus, and we also announced our alliance with Symphony to address the RPA and related off-shoring service model opportunities. Jibe significantly expands our Oracle applications' reach beyond EPM to the entire enterprise and significantly expands our Oracle Cloud Implementation capabilities. The Aecus acquisition and the Symphony Alliance provide us with global…

Thank you, Ted. As I typically do, I'll cover an overview of our 2017 first quarter results along with an overview of related key operating statistics. I'll cover an overview of our cash flow activities during the quarter, a brief overview of the Jibe and Aecus acquisitions announced today and I'll then conclude with a discussion of our financial outlook for the second quarter of 2017, including the impact of the acquisitions on that guidance. 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 will represent revenues, including reimbursable expenses. Additionally, references to pro forma results, specifically exclude noncash stock compensation expense, intangible asset amortization expense, acquisition-related charges and assumes a normalized long-term cash tax rate of 30%. As Ted mentioned, for the first quarter of 2017, total company gross revenues were $71.4 million, which represents year-over-year growth of 4% or 5% in constant currency. Our first quarter, our first quarter's revenue guidance included a reimbursable expense ratio of 11.3% on net revenues. Reimbursable expenses are engagement travel-related expenses, which are billed to clients and have no impact on profitability. The actual Q1 reimbursable expense ratio on net revenues came in at 9.8% were lower than expected, unfavorably impacting gross revenues year-over-year comparison by 1.5%. Our net revenue, or gross revenue less reimbursable expenses, growth was 5% or 6% in constant currency and was within the guidance range we provided. Gross revenues for the Hackett group, which excludes ERP Solutions, were $60.2 million in the first quarter of 2017, an increase of 4% or 5% in constant currency on a year-over-year basis. Hackett U.S.…

Thank you, Rob. As Rob said, let me comment on outlook and on some of our strategic priorities. As we look forward, let me speak more broadly about the transitioning demand environment and on the opportunities that are emerging. As I've been saying for several quarters, the rapid development and move to cloud applications and infrastructure, along with improving analytics, mobile functionality, user experience being introduced in the market place by technology providers, is dramatically influencing the way business compete and deliver their services. This will disrupt entire industries at an accelerated pace, forcing organizations to fundamentally change and adopt these new capabilities in order to remain competitive. The speed of change will only be limited by the ability of the technology providers to deliver required functionality and performance. But regardless of their delivery limitations, the mere threat or opportunity promised will lead to one of the most significant enterprise transformation periods. This will redefine the traditional, sequential and linear-based business models and activities to fully network the dynamic automated workflows and events, with enhanced analytics that will finally deliver on much anticipated predictive analytics and artificial intelligence expectations. The so called digital transformation area is very attractive to our organization -- our organizations, as we believe our clients will increasingly turn to us to provide them with best practice insight on what technology can deliver and what changes in business models work and justify significant investments as well as transformational change. On a near term basis, the active considerations of cloud and RPA and the related transformative promise, disrupts the flow of on-premise to traditional and traditional transformation initiatives, more significantly than we expected at the beginning of the year. In addition, the transition from on-premise to cloud software offerings are being further accelerated by increasing sales channel incentives…

[Operator Instructions] Our next question comes from the line of Jeff Martin with Roth Capital Partner.

Can you shed some insight on specifically how the move away from on-premise is specifically affecting your U.S. business? And what kind of timeline do you foresee that impacting you on? And how will the transition away from this U.S. slowdown come about?

Well, as we said last summer, two things. Oracle did a couple of things that were important to our business. One was that they significantly increased the incentive for cloud applications sales to on-prem. And they also integrated their EPM channel with their ERP channel as well. And those are a couple of changes that we have tracked pretty closely as we looked at how quickly we wanted to accelerate the move to cloud and to build that capability at the expense of on-prem, in order to follow, I'll call it, their drive, and that they're transition to closely benefit our business model the most. What we saw, as we were -- as we saw the first quarter played out, we just saw an increasing deceleration of the on-prem business and an emphasis to cloud. And as we have been looking and considering those alternative, we quickly said, do we want to continue to try to build that capability organically or alternatively as we had been considering and looking at our option in order to prepare for that transition, did we want to complement whatever we were doing with acquisitions? As we saw that activity accelerate and we saw the emphasis and the number of cloud products continue to kind of emerge and be promoted by the -- by Oracle, we decided that instead of trying to be passive throughout '17, we wanted to do two things: one, obviously, we want to continue to optimize the opportunities of on-prem, continues to be the largest source of revenue for Oracle and for us on the apps basis. But at the same time, we wanted to make sure that we weren't missing out on any mindshare opportunity, both through the channel or through their offering, I'll call it, immediately instead of looking…

Okay. To hit those low end of your 5% to 10% revenue growth objective, it appears as though you're being down 10% U.S. is somewhat of a 1 quarter phenomenon, is that what you're factoring into your guidance?

I do expect on-prem activity to continue to decelerate. What you're going to see is, we do expect that activity not to be, I think, as significant in Q2. Q2 for us had the comparison have a lot of different things. Not only was it an incredibly high performing quarter for us last year, we were up 23% in the U.S. It had very strong activity in some workforce areas as well. So to us, it's a combination of comp and the fact that if the on-prem activity is going to be noticeable, we need to be on the other side of cloud, and we obviously, weren't participating in that as we entered Q2. So our hope is that we can offset that, and as I said in my commentary, stay around the low end of our long-term growth rate, which I said, which is long-term growth rate of 5% to 10%. And then you know the kind of leverage we get on our model. So it should allow us to turn be nicely profitable and provide a nice return to shareholders. More importantly, we should then be on the other side of, again we think, the migration to cloud, which will happen over the next three to five years, all of the transformation to happen as a result of the implementation of that offering. We believe all of that, along with the quick emergence of RPA technology, we think are just incredibly significant transformative events, and we think we're going to be strongly positioned across all those dimensions.

And then can you give us a sense of what Jibe and Aecus add to annual revenue on a run-rate basis, and if there's much of a difference in margin structure versus your current margin structure? And then at what kind of growth rate those businesses are growing? That would be helpful.

Well the Jibe had approximately $16 million but again the tricky side of that, Jeff, is that it has rapidly growing cloud revenues, and it has the on-prem EBS side of the revenue side. So that's why we retained our guidance to Q1 in our comments to accretion to just the second quarter. But if we have the impact that we think we have -- so for example, we've already been in front of 2 clients, with meaningful opportunities just since we started -- since we knew that we were going to be going to market together, if we get the kind of success on the cloud side, you're going to see -- we think you're going to see a very different $50 million from Jibe revenue 12 months from today. So we expect their revenue to transition along by leveraging our access and the complement -- how well we complement each across the whole Oracle channel and offering spectrum. So we don't expect their revenue to actually grow in the next 12 months. We expect the cloud side to aggressively grow. And we expect that to come in at significantly higher margins that they were experiencing. So we would expect the revenue to shift and come in what I'll call it Hackett, Hackett kinds of traditional Hackett margins that you've seen from our EPM group. We don't expect that to be any differently as that transition takes place. But they've enabled us is the ability to get in front of a enterprise Oracle opportunity, and not only capture a much broader opportunity from on Oracle client, but to also ensure that those opportunities that are being sold with those offerings that include EPM are not being excluded. So we think it has tremendous strategic value not only in the way we aggressively grow cloud but in the way we defend the EPM transition as well. So I know it's long-winded, I know it's a little complex, but that is the transition that everyone that's implementing Oracle applications on both the on-prem and on the cloud side are experiencing.

Thank you. And our next question comes from the line of Morris Azjenman. Your line is open.

Morris, you there?

And at this time, I show no further questions. I would now like to turn the call back over to Mr. Ted Fernandez.

Let me thank everyone for participating on our call. We look forward to updating you when we report our next quarter. Thanks again for participating on our call.