The Hackett Group, Inc. (HCKT) Q1 2020 Earnings Report, Transcript and Summary

Welcome to The Hackett Group First Quarter Earnings Conference Call. [Operator Instructions] Please be advised the conference is being recorded. Hosting tonight’s call are Mr. Ted Fernandez, Chairman and CEO and Mr. Bob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin.

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, CFO. A press announcement was released over the wires at 4:05 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, especially in light of COVID-19. 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 normally do, I’ll open the call with some overview comments on the quarter; turn it back over to Rob to comment on detailed operating results, cash flow and also comment on outlook. We will then review our market strategy related comments and then move on to Q&A. Please allow me to start the call by acknowledging the incredible bravery and commitment of our healthcare providers, first responders and those dedicated individuals who have continued to work non-stop and under very dangerous circumstances to support all of us during this tragic pandemic. We eagerly wait for the conditions to exist where all of us around the globe are able to return to our normal life, however that is ultimately defined. I would also like to acknowledge our associates and clients that quickly and successfully adapted to the remote delivery requirements around the globe. In spite of the limited notice and varying circumstances, I commend their dedication and commitment to their respective client initiatives in allowing substantially all of our engagements to continue. Now on to operating results, this afternoon we reported net revenues of $65.2 million and pro forma earnings per share of $0.24, which were both within our guidance range. In spite of some disruptions from the pandemic in March, we reported solid U.S. revenue growth, which was partially offset by weak European performance, as expected. What I hope doesn’t go unnoticed was the long-awaited revenue growth from our EEA group, not only did our Oracle Cloud growth clearly outstrip their year-on-year revenue decline from our legacy Oracle on premise business, but we also saw very strong growth from our SAP and OneStream groups. Overall, Q1 U.S. revenues were up 11% with EEA up 20%. More impressive is that the Oracle ERP revenues are expected to be up sequentially from Q1 to Q2, in spite of the current environment. Our Strategy and Business Transformation activity continued to be solid around digital transformation initiatives. However, this group was the group which most quickly felt the impact of the pandemic in March, as some expected sales decisions were deferred. On the international front, Europe continued to be challenging. It is a shame that as the UK January election results started to provide the clarity needed to allow business demand to return, we see some of the same decision delays emerge, but now due to the pandemic. On the investment side, we strongly believe that the strategic investments we have made to fully digitize all of our IP, the development of our two next-generation platforms, quantum leap our state-of-the-art global leading benchmark platform and our proprietary Hackett Digital Transformation Platform or DTP are highly differentiating our offering and will be important drivers of our growth for many years to come. Additionally, our investments with rapidly growing eProcurement, EPM and RPA software providers also continue to be key to our strategy and digital transformation momentum and are also important future drivers of our growth. On the balance sheet side, our ability to be highly profitable and generate strong cash flow from operations has allowed us to increase our dividend, buy back stock, fund acquisitions, while continuing to invest in our business. I cannot tell you how important it was to start the year and finish the first quarter with a solid cash position and no outstanding debt, which provides us the ability to manage our future during the volatile economic period. Before I turn it over to Rob to provide our detailed operating results and more perspective on the second quarter, I would like to share some of the operating guidelines that we are using to manage our second quarter. We started the year by aggressively adding associates and strategic hires, consistent with our 2020 growth prospects. As we started to feel the affects of the pandemic in early to mid-March and knowing we were entering the period with a strong cash position, we quickly decided to make the safety and well-being of our associates our top priority. That meant not only making sure that they were taking all necessary safety precautions to ensure their safety, but to avoid any layoffs directly resulting from the pandemic, at least through the end of our second quarter. We believe this would provide our associates with very important peace of mind to weather the storm, while we gained critical market information from which to make any further decisions. On our first weekly coronavirus global update call on March 20, we shared our commitment with our associates and we communicated that we were prepared to forego profitability in the second quarter, as long as we did not weaken our solid cash position and without needing to use our credit facility. We also informed our associates that we would update our employee-related decisions as we better understood the impact of the disruption on our client decision-making, and on existing and proposed initiatives and address any required changes prior to the beginning of the third quarter. With that said, let me ask Rob to provide details on our operating results, cash flow and also comment on outlook. I will make additional comments on strategy and market conditions following Rob’s comments. Rob?

Thank you, Ted. As I typically do, I will cover the following topics during this portion of the call. I’ll have an overview of our 2020 first quarter results, along with an overview of related key operating statistics. I will provide an overview of our cash flow activities during the quarter and I will then conclude with a discussion on our financial outlook for the second quarter of 2020. For purposes of this call, I comment separately regarding the financial results of our Strategy and Business Transformation Group or S&BT our ERP, EPM and Analytics Group or EEA; our International Group and the total company. Our S&BT Group includes the results of our North America IP-as-a-Service offerings, which include our executive advisory programs and benchmarking services and our business transformation practices. Our EEA Solutions Group includes the results of our North America Oracle, SAP Solutions and OneStream practices. Our International Group includes the results of our S&BT and our EEA groups that are based primarily in Europe. In addition, please note that all references to net revenues represent revenues excluding reimbursable expenses. During our call today, we will reference certain non-GAAP financial measures which we believe provides useful information to investors. We include reconciliations of non-GAAP financial measures to GAAP in our press release filed earlier today. Additionally, my comments today are based on results from continuing operations. For the first quarter of 2020, our net revenues increased by 5% to $65.2 million when compared to the prior year and which is in line with our revenue guidance range. The Q1 2020 reimbursable expense ratio on net revenues was 6.7% as compared to 7.7% for Q1 of the prior year. Revenues and reimbursable expenses were both affected in March, as the economic disruption from stay-at-home orders increased throughout the U.S. and Europe. Reimbursable expenses are primarily project travel-related expenses, passed through to our clients and have no associated impact to our margin or profitability. Including reimbursable expenses, company gross revenues from continuing operations were $69.5 million in the first quarter of 2020. Net revenues for our EEA Solutions Group were $33 million in the first quarter of 2020, an increase of 20% on a year-over-year basis. This was driven by strong growth from our SAP S4 HANA implementation practice, which also benefited from strong software sales activity and the strong growth from our Cloud, ERP and OneStream practices, specific to our U.S. Oracle practice within EEA, our cloud revenue growth in excess of 15% on a year-over-year basis, resulting in the improved mix of cloud to on premise implementation revenue, which is approximately 75%. Net revenues for our S&BT Group were $24.7 million in the first quarter of 2020, essentially flat when compared to the prior year. This group’s business transformation practice is where nearly all of our March disruption impact was felt. Net revenues for our International Group were $7.5 million in the first quarter of 2020, a decrease of 27% on a year-over-year basis, as expected and discussed in the previous quarter. Total company international net revenues accounted for 12% of total company net revenues in the first quarter of 2020, as compared to 17% in the first quarter of the prior year. Our recurring revenues, which include our executive and best practice advisory and AMS groups, accounted for approximately 20% of our total company net revenues and approximately 30% of our total company pre-tax practice profitability in the first quarter of 2020. Total company pro forma cost of sales, excluding reimbursable expenses totaled $41.1 million or 63.1% of net revenues in the first quarter of 2020, as compared to $38.9 million or 62.4% of net revenues for the same period in the prior year. Total company consultant headcount was 1,026 at the end of the first quarter, as compared to 982 in the previous quarter and 979 at the end of the first quarter of 2019. Total company pro forma gross margin was 36.9% of net revenues in the first quarter of 2020, as compared to 37.6% in the first quarter of 2019, primarily due to hiring activities, as we exited the fourth quarter and into the first quarter in anticipation of revenue growth. S&BT gross margins on net revenues, was 44.1% in the first quarter of 2020, as compared to 46.8% in the first quarter of the prior year. The margin decrease was primarily driven by revenues that were tempered by the emerging pandemic disruption in March and by increasing headcount-related costs. EEA gross margins on net revenues, was 32.9% in the first quarter of both 2020 and 2019. International gross margins on net revenues was 31% in the first quarter of 2020, as compared to 27.8% in the first quarter of the prior year, primarily driven by the restructuring actions that were discussed in the previous quarter, which reduced headcount-related costs. Pro forma SG&A was $13.9 million in the first quarter of 2020, as compared to $14 million in the previous year and represented 21% and 23% of net revenues, respectively. Pro forma EBITDA in the first quarter of 2020 was $11 million, as compared to $10 million in the same period of the prior year and represented 17% and 16% of net revenues, respectively. Total company pro forma net income for the first quarter of 2020 totaled $7.6 million or $0.24 per diluted share, which was at the midpoint of our first quarter’s guidance. This compares to pro forma net income of $7 million or $0.22 per diluted share in the first quarter of 2019. Our pro forma return on equity was 24% for the first quarter of 2020. GAAP diluted earnings per share was $0.17 in the first quarter of 2020, as compared to $0.22 in the first quarter of the previous year. GAAP results for the first quarter of 2019 included a $1.1 million benefit due to adjustments to contingent earn-out liabilities relating to acquisitions and lower GAAP income tax expenses, both of which benefited GAAP earnings by approximately $0.05 when compared to the first quarter of 2020. The company’s cash balances were $23.3 million at the end of the first quarter of 2020, as compared to $26 million at the end of the previous quarter. Net cash provided by operating activities in the first quarter of 2020 was $6.5 million, which was primarily driven by net income adjusted for non-cash items, partially offset by increases in accounts receivable. Our DSO or days sales outstanding at the end of the first quarter of 2020, was 70 days as compared to 66 days at the end of the previous quarter. During the first quarter of 2020, the company paid $5.8 million for its second semiannual dividend, which was declared in 2019. During the first quarter of 2020, we repurchased 198,000 shares of the company’s stock at a total cost of approximately $3 million, including purchases from employees to satisfy income tax withholding triggered by the vesting of restricted shares. Our remaining stock purchase authorization at the end of the quarter was $5.6 million. Now moving to the second quarter of 2020, as Ted mentioned in his comments, due to economic uncertainty, we are limiting our comments on outlook. Current estimates suggest sequential revenue declines of 15% to 20% from Q1 to Q2, and given our decision to maintain current staffing levels through the balance of the second quarter, we expect to forego a significant level of profitability. However, we do not expect our net cash balances to decrease during the second quarter. As prudent measures, we also intend to draw down on a portion of our credit facility during the second quarter. In addition, the Board of Directors have also deferred our dividend declaration decision until closer to quarter end. At this point, I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months.

Thank you, Rob. As we look forward, let me share our thoughts on the short-term and long-term demand environment and the growth opportunity it offers our organization. It goes without saying that we have entered an unprecedented period when demand destruction necessitated to ensure our safety has required extreme measures. But as we deal with the current environment, I believe it is equally important to remind ourselves of the environment we had and should be able to regain once we’re able to wrestle this tragic pandemic to the ground. The digital transformation of our society is just beginning with the transformative innovation in emerging enterprise cloud applications, workflow automation, process mining and artificial intelligence dramatically influencing the way businesses compete and deliver their services. As I have repeated over the last several years, traditional sequential and linear business-based business models are changing to fully digital and dynamic automated workflows and events with enhanced intelligence. Digital transformation is redefining entire industries at an accelerated pace, forcing organizations to fundamentally change and adopt these new capabilities in order to remain competitive. On the demand side, we see the short-term environment is highly volatile and unpredictable. So I believe it is better to wait and see how quickly we can address the healthcare concerns and also protect our economy. I will not try to do this on this call and wait for further information for now. What we now know is that client activity remains solid and is only being deferred because of the current circumstances. We will have to wait to see how it impacts client priorities and investments, but we know that the agility and intelligence they require are best delivered by the emerging technologies that we help them evaluate and implement. If the financial crisis is any indication, we expect the U.S. marketplace to be most aggressive in addressing the health concerns as well as returning to normalcy as expedient as possible. We contrast with Europe which we expect will be more measured and take longer to return to normalcy. With that said, it is clear that all markets and clients that we serve will increasingly reliant on digital transformation to remain competitive. Strategically our focus will remain the same, which is to continue to build our brand with our new offerings and capabilities focused on digital transformation around our fully digitized and unmatched benchmarking and best practices intellectual capital. This should allow us to serve our clients strategically, increasingly remotely, and whenever possible, continuously. Specifically, we will continue to redefine our global benchmarking leadership through additional enhancements in Quantum Leap, our digital benchmarking Software-as-a-Service solution. As I always say, this platform allows us to deliver more information with significantly less client effort. It also allows our clients to leverage our IP and track transformation initiatives over the respective life of their efforts. We believe that there is no comparable platform in the market and we believe we are just starting to see the benefits from the state-of-the-art benchmarking platform. We will also continue to refine and improve our Digital Transformation Platform to further differentiate our unique IP and related capabilities. DTP allowed us to fully digitize our IP and align proven software configuration and organization solutions to help clients drive transformational change. DTP is a core asset to both our business transformation and cloud implementation offerings. Given the success of our existing IP as a Service initiative, and given the improved functionality we continue to add to our Quantum Leap and Digital Transformation Platforms, we believe we will attract other global brands’ strategic partners to similar programs. We expect to launch paid pilot initiatives with new partners that will further demonstrate our unique capability and unmatched credibility that our brand brings to digital transformation business case assessment, as well as implementations. Lastly, even though we have the client base and the offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our IP to add scope, scale and capability which can accelerate our growth. In summary, we continue to build our momentum in the U.S., which allowed us to resume our growth. Even though we’re now entering a challenging period, this progress demonstrates that the investments we are making in our digital platforms, as well as expanded cloud applications capability and software partners, as well as the investments in our IP-as-a-Service offerings provide us with highly differentiated offerings and strategic access to most of the leading global companies. As always, let me close by thanking our associates by asking them to remain safe, for their tireless efforts, and always urge them to stay highly focused on our clients and our people, regardless of the short-term challenges we encounter. And remind them that we will emerge stronger than ever. Those conclude my comments. Let me turn it over to our operator and let’s move over to the Q&A section of our call. Operator?

[Operator Instructions] Our first question in the queue is from George Sutton from Craig-Hallum. Your line is now open.

Thank you. Ted, I know entering Q1 your activity pipeline was the highest that it’s ever been, and obviously then the world changed. So I’m wondering if you could give us a little bit better sense of what’s happened to that pipeline. You did mention deferrals on the call. But how much of that has been deferred in your view and for how long, if you have any sense and how much of that just simply won’t happen or was lost competitively?

Well first of all, activity was high throughout the quarter and in fact activity continues to be high even though our clients obviously are distracted with some of these new priorities. With that said, it’s important to understand that the growth that we achieved in that EEA group which you know, George, really hampered our growth over the last three years. So we’ve converted and continue to convert a significant amount of the technology-related activity. And as you also know on the Strategy and Business Transformation side, which has above our benchmarking and executive advisory business, both which have a multi-year contract component in their effort. Those businesses are expected to remain relatively stable during this period as well. Where we saw the deferral of decisions were around some of the business transformation engagements where the interaction with key client personnel in solutioning that it entailed just is where we saw some of the deferral of decisions. I’m thinking of the top 10 opportunities that we were tracking, both through March and April. Those opportunities which are not starting, none of have been, I will call it, cancelled. But we are seeing clients saying, hey listen. We need a little bit more time before we make a decision, given what’s happening. So to us, in fact the uncertainty and the reason for limiting our comments relative to outlook were around that. That is exactly that opportunity. We know that we are highly engaged with clients on many issues. In fact, when you look at some of the decisions that clients need to make which is we’re estimating that clients are going to have to make 15% to 30% cost reductions to deal with some of the demand erosion that they will experience through the balance of 2020. They are directly aligned with the nature of the work we do, which is strategic cost reduction, working capital management, and in many cases the way the clients are using some of the cloud implementations to affect that transformation. So it’s really going to be up to the clients. How will they deal with the demand erosion that they have? We’ve seen some clients I mean totally continue through and continue with their commitments. And we have seen some that have said let’s just change the scope somewhat. But as we said on the technology side, boy, it has been the – the level of revenue growth that we expect is considered to be minor on the business transformation side, especially if you take off some of the recurring revenue that we have on that strategy in business transformation side. That is where we’re expecting to see or have seen more deferral or delay in decision-making. But with that said, most of that work is strategic cost reduction, dealing with agility. So will the client decide to do these things on their own, best efforts, guess or will the clients require the type of information that we provide to basically assess and define the art of the possible and allow them to be a lot more efficient with the decisions that they are having to make. That will vary by client and by industry and that’s the volatility that we are experiencing and we have said we wanted to continue to monitor through the end of the quarter.

Now if we look back to prior cycles, and you’re consulting operations and strategic transformation piece were a bigger component of your total back then, and I would broaden the discussion to say, okay, strategic cost reduction, working capital management and also supply chain. Those are areas that are clearly going to be in need in this environment. The difference is the prior cycles my sense is took longer to evolve. So the decisions were able to happen over a period of time. This has all happened in such a condensed period. Is that part of the issue in that ultimately those customers are going to realize their needs at some point in the relative near future? Is that a fair way to think of it?

I think it is, George. I mean look, their needs haven’t changed. And in fact, in most cases, they’re significantly greater, especially when you think of some of the productivity and cost related issues they’re going to have to deal with through the balance of the year. So what’s the biggest impediment? Well, the one we know. We’ve got to allow people to be able to return to work and do that in a manner where they feel safely and allow the engagement and the support and the interaction around those activities to happen as they normally would. So they will improve along with what many of the industries are expecting, which is the elimination or reduction of the lockdown guidelines, which I think are inhibiting some of the priorities and some of the requirements. But I do agree with you. The requirements, one, are not going away, they are only going to be enhanced. Two, the cycle can be shorter if we are able to open and return and engage clients across the board and where the client priorities allow for those decisions to happen. So I think we’re well-suited to help clients with these issues, and that’s why we remain very optimistic and I wanted to make sure that our comments reminded everyone about the demand, first the structural demand coming from digital transformation, but also the demand that we have been experiencing and expect to be able to resume as some of the activities return to some level of normalcy.

Got it. Ted, Rob, thank you. Stay safe.

Thanks, George. Likewise.

The next question is from Andrew Nicholas from William Blair. Your line is now open.

Hi, good evening. This is actually Trevor Romeo in for Andrew. Thank you for taking my call here. First, just wanted to touch on the cost side a bit more if I could. You mentioned that you plan to maintain current staffing levels throughout the second quarter. Just any sense of how severe or how long these decision deferrals would need to last for you to reevaluate that stance, and are there any other levers within the...

I said in my opening comments, one, we made that decision to basically limit any layoffs that were directly driven by the pandemic, to make sure that we were providing our associates with as much peace of mind, especially as the level of uncertainty was really not really, I think was barely understood. I think we now have a much better idea, all of us collectively have a much better idea of what the health versus economic challenge is. But we made that commitment through the second quarter. We did that by modeling a series of scenarios which allowed us to make that commitment to our people. Could we have easily, taking I would call it a normal and safe route, anticipated the disruption like many would and made some of those decision much earlier? The answer is, we just believe that the right thing for our organization was to protect our associates and not make any of those decisions until we had better information. We have defined that. We said that those decisions would be reevaluated as we were exiting the second quarter. I think once we see the client decision-making in May and June, that will then tell us what decisions, if any, we need to make, and as we said on the call, we would like to be able to do that before we start the third quarter, but still maintain any commitment to our associates to limit any layoffs through the balance of the quarter. So just to kind of summarize, we have made a significant investment in this quarter, and we expect that invest – first, we expect the business dynamics to improve, but we also expect to regain a certain level of profitability in Q3 and to continue to improve that into Q4, and hope that we can be fully back up by the beginning of 2021. But that will be determined by our client decision-making. Could that happen earlier, if things open up and the clients seek our assistance with some of the things that we just mentioned on the previous question, we’re very suited to do; the answer is clearly those opportunities are there. What we also know is that, we think we can do all of that from operating cash flow. And the drawdown in that credit line will simply be as a prudent measure. So we’ve always run the business conservatively and profitably and we expect to do that. But we believe these circumstances were unusual, required a lot more clarity before we made any decisions, and we thought our associates deserved that protection at least through the first 90 days of this pandemic.

Okay, great. Thank you. That’s helpful. And then just to follow up, as you mentioned, you came into the pandemic environment with a very strong balance sheet. I would imagine you’re focused on weathering the storm at the moment. But could you just go over kind of your updated capital deployment plans for once the dust settles? I know you kind of touched on M&A still being an option toward the end there. And you talked about the deferral of the dividend decision. Just wondering kind of where the dividend sits in your priority list and would you forego that for the right M&A opportunity if it made sense?

Well believe it or not, we see those separate. If we did an acquisition that was of any scale, that to us would clearly be a reason to use our credit facility. So we separate those two. And in fact, we continue to evaluate and look at opportunities to acquire, as we had previously mentioned. Relative to then the other priorities, look, we want to be able to take care of all of our constituencies. So our current goal is to be able to address them all. But we also thought that to simply declare instead of defer that dividend decision without having better information was not the most prudent way to go. So both are we’re basically buying 60 days of additional market, if you want to call it – to better understand the market decision-making, how quickly our clients fully reengage with us, and how they continue to reengage with us, and then we will then address profitability and dividend decisions for both the third and fourth quarter. Also wait, just to answer that more fully since I now realize we were silent. We would not expect to continue any buyback activity. The majority of the buybacks that you saw in the first quarter were primarily related to net vesting activities that normally happen in the first quarter. So we don’t expect any cash expenditure from that. So if we’re correct, and we finish the second quarter with a stronger, better cash position as we are today, then it will be entirely then what kind of profitability levels we want to achieve and how we want to address the dividends. I think we’ll have several options.

Okay, understood. Thank you very much.

Next question is from Jeff Martin with ROTH Capital Partners. Your line is now open.

Hey, Rob. Hey, Ted. Could you touch on what you are doing to stay engaged with clients and how you’ve experienced their level of engagement? Has it been more difficult to stay in front of them and what your strategy is for staying engaged?

Well first of all, it’s obviously changed. So the answer is harder – no, it’s not harder to connect with your clients and discuss their priorities. So I really believe that it’s really more about how they prioritize their decisions and our ability to assist them. So I think it’s different. So, our engagement with the clients remains high. In fact, it’s important to mention that the transition from what we would call a significant remote delivery model because of the cloud implementation work we do to virtually all remote delivery today is very, very significant, and we did that very successfully. So then I think again, the decision-making relative to our offering, if you’ve seen some of our recent press, not only have we gone out with very, very specific if we want to call it, initiatives and research and approaches to the different issues that our clients are facing, the way one of the analysts mentioned in the previous call, specific feedback around some of the supply chain disruptions, and some of the decisions that should be taking and how we could provide that help. Strategic cost decisions, not only by utilizing Quantum Leap, but we recently announced a brand new offering that allows clients to do data capture in less than a day and allowed us to submit the results in less than a week. So it was a quick way of helping clients identify priorities and size the prize by doing so at just a slightly different level, and with a little bit less information and with a very efficient tool that we built. So we think we’ve looked across managing talent and managing IT, supply chain, all strategic cost reductions, aligned them to our initiatives, been very aggressive with our campaigns, with our research alerts and engaging and talking to clients. So the only inhibitor will be clients prioritization and ability to determine when and how they want to accelerate their spend, but we are obviously also very glad with the level of spend that they have continued through the end of April.

Okay, that’s helpful. Were there any noticeable trends in terms of client behavior between say the start of April and the end of April?

No, I think some of the March decisions were, god, this is new. And so we saw a little bit more of those deferral of some of the business transformation initiatives where we felt a little bit more of that I will call it in March, where the technology obviously continued very strong through the end of the quarter with limited disruption. So no, I would say that the difference is one was clearly on hold. April was we consider it an assessment and prioritization. And now we’re going to get a chance to see how these priorities and these discussions we’ve had with clients actually launch, and that will be the information we want to be able to better understand in May and June, before we make any personnel or capital deployment decisions.

Okay. And then Rob, I wasn’t able to discern whether you said 15, 1-5, or 50, 5-0 for the cloud revenue growth in the quarter?

I said it’s 1-5, in the Oracle Cloud, coming off an increasing number. We actually had higher growth in this quarter. We actually had higher growth in the S4 HANA area and obviously our emerging OneStream Group is working off smaller numbers of – there’s are good, but don’t count in some normalized level.

Okay. Now, did you give a total cloud growth number for the quarter?

We did not, but if EEA was up in total, what, 20%?

20%.

If EEA was up 20%, the on prem drag from it was very little. Those were virtually all of that growth was driven by what I’ll call it cloud, next-generation implementation of SAP, Oracle and OneStream, so very strong, very, very strong.

Okay. And then Ted, I have to think that robotic process automation is going to be an increasing theme as we come out of this. Are you seeing increased interest there and what do you see as the opportunity?

We see increased interest and we see clients continuing to – I don’t want to call it dabble, because that’s understating it – to deploy in more narrow applications. I believe that the broadened opportunity for RPA will be when those software providers are able to articulate the ability to address or the ability for their software offering to address broader enterprise issues. We believe they still continue to be going to market too narrowly and tactically, and have not really broadened out. Now that’s relative to software and that’s relative then to the implementation initiatives. But when you consider the opportunity for further workflow automation, whether that ends up being emerging directly from the large enterprise ERP providers, or whether that ends up emerging through functional application providers or stand-alone RPA software providers; that war has started. So when you speak to RPA, just understand that that broad workflow automation opportunity that was being defined by RPA is being consumed across all enterprise applications. So it’s meaningful, but you’re seeing more emerge through in Oracle and SAP or Workday and others, than you would have expected to see from the point solution software providers that you may know, that are very narrow in the space.

Thanks for your time and well wishes to you both.

Thank you, Jeff.

Likewise to you and your team, Jeff. Thank you.

[Operator Instructions] The next question is from Vincent Colicchio from Barrington Research.

Hi Ted. To what extent is the sequential weakness tied to certain verticals? Is it broad-based or is it certain verticals that are the issue?

No, the answer really was broad-based, Vince. It really was client specific. In fact, in some of the more volatile verticals, our activity has been relatively neutral, where some have had to stop some initiatives, but some have proceeded and increased their initiatives. So no, I think this is broad-based, no different the way you’re going to see the impact as the S&P 500 companies continue to report.

And how would you characterize – I guess what I’m trying to say is, are you seeing a meaningful amount of clients looking for better financial terms, maybe in terms of payment length or better pricing?

I mean some have come in and mentioned pricing. But no, I think the real key for them is being able to efficiently deliver an outcome as quickly as you can. So they’re more focused on your ability to deliver the outcome than to try to directly attribute that to overall cost or rates.

Okay. Maybe Rob, what was capital spending the quarter?

$533,000, Vince.

Okay, that’s it for me. Thank you.

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

I would like to thank everyone for participating in our first quarter call and look forward to updating everyone again when we report the second quarter. Thank you.

This concludes today’s call. Thank you for your participation. You may disconnect at this time.