Welcome to the Hackett Group Second 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. 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 second 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. 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 the in 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, 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 that are 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 second quarter earnings call. As we normally do, I’ll open the call with some overview comments. I will then turn it back over to Rob to comment on detailed operating results, cash flow as well as comment on outlook. We will then review our market strategy and related comments after which we will open it up to Q&A. Given the recent rise in Delta variant infections, I would like to continue to acknowledge those dedicated healthcare providers who continue to work nonstop and selflessly to support us all during this pandemic. Consistent with our comments since the end of the second quarter of last year, we continued to experience increased client engagement and demand for our services throughout the quarter. It is evident that organizations have recognized the need to embrace digital transformation as a requirement to remain competitive. Correspondingly this afternoon, we reported net revenues of $73 million and pro forma earnings per share of $0.39 both in excess of guidance. Of note is a $5.3 million SAP software sale transaction, which also increased our pro forma, which increased our pro forma EPS by $0.09. Excluding this software sale, our net revenues exceeded the high end of our guidance and were up a strong 7% sequentially and up 29%, when compared to the COVID impacted second quarter of last year. The results are consistent with the strong demand recovery we have been experiencing since the end of the second quarter of last year. It is also important to note that we are now operating above pre-pandemic revenue and clearly profitability levels. U.S. sequential revenue growth, excluding the software sale was up 7% sequentially and up 28% when compared to the second quarter of last year. The results were driven by the…

Thank you, Ted. As I typically do, I’ll cover the following topics during this portion of the call. I’ll cover an overview of our 2021 second quarter results along with an overview of related key operating statistics, I’ll cover an overview of our cash flow activities during the quarter, and I’ll conclude the discussion with our financial outlook for the third quarter of 2021. For the purposes of this call, I will comment separately regarding the financial results of our strategy and business transformation group, or S&BT, our ERP, EPM and Analytics solution group or EEA our international group and the total company. Our S&BT group includes a results of our North America IP-as-a-service offerings, our executive advisory programs and benchmarking services and our business transformation practices. Our EEA solutions group used the results of our North America Oracle, SAP, and OneStream practices. Our international group includes the results of our S&BT and our EEA resources that are based primarily in Europe. In addition, please note that all references to net revenues represent revenues, excluding reimbursable expenses. Reimbursable expenses are primarily project travel-related expenses pass through to our clients and have no associated impact to our margin or profitability. Given the limited amount of business travel through the pandemic, we encourage investors to focus on net revenues to assess revenue growth and margin trends. During our call today, we will reference certain non-GAAP financial measures, which we believe provides useful information to investors. We included reconciliations to GAAP to non-GAAP financial measures in our press release filed earlier today. Additionally, my comments are based on results from continuing operations. For the second quarter of 2021, our net revenues increased to $73 million up 15% when compared to the prior quarter and up 39%, when compared to the prior year, which…

Thank you, Rob. As we look forward, let me share our thoughts on the short and long-term demand environment and on a growth opportunity it offers our organization. Although the pandemic created unprecedented demand disruption, it is now clearly evident that has also created heightened awareness and has accelerated demand for digital transformation initiatives. This means that digital innovation and enterprise cloud applications, analytics, and infrastructure, workflow automation, and process mining are dramatically influencing of the way businesses compete and deliver their services. Digital transformation is redefining all activities at an accelerated pace, forcing organizations to fundamentally change and adopt these new capabilities in order to remain competitive. Consistent with our comments, since the end of Q1, during the second quarter, we continue to experience increased client engagement and demand for our services. This increased demand is resulting in competition for experienced talent. Unlike we have seen in a very long time. With that said, we also believe with a new, more flexible work from home delivery model will evolve, which will enhance our ability to attract and retain resources for our organization. The most challenging retention issue of our industry has always been the amount of travel required to serve clients. Specifically, the increasing momentum since the end of Q2 of last year has continued into 2021. This has positioned us well for the balance of the year and should allow us to return to our target long-term growth and profitability levels. In addition to improve, digital transformation demand, we continue to see an increase in interest from potential partners that desire to license our IP and brand permission and leverage our quantum leap and digital transformation platforms to bolster their business case development and value selling as well as their delivery efforts. We closed the meaningful relationship during…

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

Thank you. This is Adam on for George. Ted, great to hear about the closing of the first IP customer, I was hoping you could provide a little more detail on how that deal came to be, what you expected to become in the future?

Well, without providing too many details that haven’t been publicly disclosed by the client, simply to say that it’s taking us into a new area. I had a client in the infrastructure space that believes that the brand permissions that the performance data that they will utilize to go to market with will significantly enhance their ability to close deals and at an accelerated pace. So for us, a great new opportunity, incredible brand and really enhances our data capture reach in an entirely different areas. So very meaningful in different ways.

And then one follow-up for me, you also mentioned at the beginning of the call, how companies are beginning to really recognize the need for digital transformation. Any thoughts or insight you could offer, just specifically what you’re hearing from clients and how do you think the opportunity set has changed for packet when you compare it to before the pandemic?

Without a doubt, the clients are aggressively engaging in conversations on what is the best path for them to prioritize their digital transformation efforts that allows us to engage clients then in evaluating those opportunities, sizing the performance improvement opportunities that would come from those initiatives as well as then implementing, helping them, implement them, if our scale and capability fits. So we look at our clients and we see just how engaged they are, how broad the questions are, how they’re prioritizing and funding these initiatives. We just see that – we see it moving, we see velocity, we see decision-making engagement, all of it at an incredibly high level.

Next question in the queue is from Vincent Colicchio with Barrington Research. Your line is now open.

Yes. And just to follow-up on what you just said, Ted. So are you seeing sales cycles improved versus last quarter?

Well. When you look at 7% sequential, excluding that large software transaction, the answer is no, we were happy just to have them right where they’re at. In fact to some extent, the demand is outstripping resource capability. So for the first time, as long as I can remember having the resources are in place are as important as having a capability and credibility in those capabilities.

You mentioned the tight labor market, the incremental increase in headcount this quarter. Were those wages up versus what you had to pay in recent quarters?

The answer is the wages are increasing. And in fact, for us going into the third quarter, since we have some movements, if you recall, from what we did in 2020 we actually have compensation increases actually kicking off – kicking-in in this quarter which are – they were planned. But I think they’re also responsive to the market conditions.

And Rob in terms of the guidance, I think he said that excluding the SAP sale, you expect EEA revenue to be flat to up. Can you give me a little more color on where the strength is and where the drag is?

Look, it’s across the board. It’s across the board, Vince. And it comes back to how do you build on in their case, let’s go back 10% sequential increase. So when you consider that we’re coming off 10% sequential increase, you lose 3% available days in the quarter. Sequential increase in EEA would be pretty strong for us.

And then lastly any color on the international, it finally started growing. Now it’s down again, do you have any color on what’s going on there?

A small number now.

Well, it’s 8% of our revenues, but that doesn’t mean it’s not something we expect to grow. I think they’re still experiencing more volatility than we have in the U.S. both in the impact of the pandemic as well as their ability and willingness to put in some of the actions to support some of the recovery related issues. So I think it just results in more volatility. I think it’s also impacted by the fact that our scale is smaller. So we’re relying on fewer clients and fewer people and limited offerings given the size as it compares to the U.S. I mean, when you look at the growth in the U.S. – the year-on-year in the U.S. in the second quarter, I mean, those are just – we haven’t seen numbers like that in a long time. And that’s the growth excluding the large software deal.

One more, if I may. Please remind us, what’s your long-term your target growth goal is. I haven’t heard that number in a while.

Never changed it. 5% to 10% top line results and 15% to 20-plus-percent bottom line growth.

Thank you. Nice quarter.

Thank you, Vince.

[Operator Instructions] Next question in the queue is from Jeff Martin with Roth Capital Partners. Your line is now open.

Thanks. Hi, Rob. Hi, Ted. I apologize for getting on the call a little bit late. I did come on right at the end of your prepared remarks. So I apologize if this is repetitive. But could you give us an update on the efforts to establish an East Coast presence?

They continue. As I mentioned last quarter, we were aggressively pursuing a couple of acquisitions, one which differed and one which went to another party. We continue to talk to the organizations to see if we can find both cultural and strategic fit with that geographic location. So the efforts continue. And I guess, I’ll leave it at that. I don’t know if you have something more specific than that, Jeff.

No. That’s helpful. And then you mentioned last quarter that EPM seeing an increased demand sequentially in Q2. I was curious how that flow through the balance of the quarter and what you’re seeing so far in the third quarter there?

Well, I mean that’s an important follow on to the other question, because if you recall, the reason that – the primary reason for that East Coast acquisition target was to strengthen the combination ERP, EPM capabilities in the East Coast, which we thought we were not leveraging anywhere near the capability that we have. With that said we did see nice sequential growth in that group, including the East Coast part of the business in Q2. And we are expecting those groups to grow sequentially from Q2 to Q3 in spite of the 3% available days loss from Q2 to Q3.

Right. Okay. And then with respect to your partners on the non-Oracle side, I’m curious if you could give us an update there? And are we nearing critical mass with some of the newer technology implementers out there that that you might start to score separately?

Well, in some of them, like OneStream, we clearly are approach and critical mass, and we’ve become one of the leading OneStream implementers globally for that organization. So there we are in the Coupa space we have – we are leading there. Now in some of the other areas that we’re now exploring some of the workflow automations that relate to ServiceNow or Microsoft they are very early stages.

Okay. That’s helpful. Thanks, Ted.

Thanks, Jeff.

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

Well, again, let me thank everyone for participating in our second quarter call and look forward to updating everyone again when we report the third quarter. Thank you for participating.

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