Welcome to the Hackett Group Third 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.

Good afternoon, everyone and thank you for joining us to discuss the Hackett Group’s third 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 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 third quarter earnings call. As we normally do, I'll open the call with some overview comments on the quarter. I will then turn it back over to Rob to comment on the detailed operating results, cash flow as well as comment on outlook. We will then review our market strategy related comments, after which we will open it up to Q&A. Although it appears that COVID-related activity is truly tapering, I would like to continue to acknowledge those dedicated health care providers who continue to work nonstop and under difficult circumstances in many cases to support all of us during this pandemic. Consistent with our comments since the end of the second quarter of last year, we continue to experience increased client engagement and demand for our services throughout the quarter. It is clearly evident that organizations have recognized the need to embrace digital transformation as a requirement to remain competitive and at a rate -- and the rate of digital innovation and related change is truly unprecedented. Correspondingly, this afternoon, we reported net revenues of $71.4 million and pro forma earnings per share of $0.32, both above our quarterly guidance and up strongly on a year-over-year basis. Excluding our large SAP software sale in Q2, revenues were up 5% sequentially. The results are consistent with the strong demand recovery that, as I said, we've -- we have been experiencing throughout the year. And it's also nice to note that it's above prepandemic levels. U.S. sequential revenue growth, including the large Q2 software sales was up 7% sequentially and up 27% when compared to the third quarter of last year. The results were driven by the strong performance of both our strategy and business transformation as well as our EEA or ERP…

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 third 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 will then conclude with a discussion on our financial outlook for the fourth quarter of 2021. For purposes of this call, I will comment separately regarding the financial results of our Strategy and Business Transformation Group, or SMBT; our EPM ERP and Analytics Solutions 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, 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 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 passed through to our clients and have no associated impact to our margin or profitability. Given the limited amount of business travel due to 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 provide useful information to investors. We included reconciliations of GAAP to non-GAAP financial measures in our press release filed earlier today. Additionally, my comments today are based on results from continuing operations. For the third quarter of 2021, our net revenues increased to $71.4 million, up 24% when compared to the prior year, which is above the high…

Thank you, Rob. As we look forward, let me share our thoughts on the near and long-term demand environment and on the growth opportunity it offers our organization. Although the pandemic created unprecedented demand disruption, it also created heightened awareness for digital technology and has resulted in an accelerated demand for digital transformation initiatives. This means that digital innovation in enterprise cloud applications analytics and infrastructure, workflow automation and process mining are dramatically influencing 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. 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 that 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 emerging service delivery model helps us address our more challenging retention issue of our industry, which is the amount of travel required to serve clients. The increasing momentum since the end of Q2 of last year has continued throughout 2021. This positions us well to finish the year and should allow us to return to our target long-term growth and profitability levels. In order to increase our revenues across all of our IP-led offerings, we will continue to invest in our IP platforms and to increase our sales and marketing resources. This will include our IPS service offerings to partners that desire to license our IP and brand permission to bolster their business case development and value selling as well as delivery efforts. We continue to have over 10 such opportunities with…

[Operator instructions] Our first question comes from Jeff Martin from Roth Capital Partners.

I hope you're doing well. Ted, I wanted to dive into the IP of the service. Are you -- do you have line of sight for what the benefit could be in 2022 from some of these relationships? It sounds like they continue to mature in advance here.

The answer is yes, we do. And we believe that, as we said when we started and brought on our first client in that the impact of them should be meaningful to our future results.

Okay. Great. And then as you exit the year at double-digit net revenue growth rate, how should we be thinking about 2022 in terms of net revenue growth? Is double-digit growth sustainable? Or are we kind of still thinking in that 5% to 10% organic growth range?

Well, we've always used the 5% to 10% reference. I think we stay with that. We believe we're in a demand environment that should allow us to operate towards the high end of that. Probably the most meaningful information that I could share is that when we look back at our business over the last 4 years and fully exclude the impact of our Oracle on-prem business, we believe that our compounded annual growth rate was, again, towards the high end of that range that we provide. So that's what we're targeting.

Okay. And then I wanted to touch on the EPS or the pro forma EPS in the third quarter here, a $0.03 beat relative to what I think was consensus of $29 million. Is an outsized usually come in $0.01 or so ahead? What were the primary contributing factors to that type -- that size of outperformance in the quarter?

When we look at it, it's obviously we had stronger -- the demand continued at a slightly stronger pace than we expected. So we had pretty strong performance across the group. We also saw the value-added seller activity help us with part of that, if you want to call it, beat for lack of a better term. We're continuing to see more of those SAP-related deals, not in an amount that's anywhere near the one we had in Q2, but at a little higher pace than we've had in the past year. So that helped us a little bit.

Okay. Great. And then last one for me is I missed the first part of the call. I don't know if you already gave this in your prepared remarks, but in terms of your East Coast expansion strategy, particularly with the cloud business, I was curious if you could provide an update there?

Well, as you know, the ones that we targeted, one was acquired and the other one deferred any decision. We continue to look for an opportunity in the East Coast. I think it's worth noting that the -- our Oracle EPM business performed very strongly this quarter. So as I mentioned also in second quarter, even without the acquisition, our pace has picked up across the country, including the East Coast. So the urgency is not quite the same. It does not mean that if we saw -- if we had a group that we thought culturally fit and the value was reasonable to both sides that we would aggressively pursue a transaction like that. I can tell you that we are continuing to look for Oracle related acquisitions, whether or not they end up specifically addressing the East Coast Gap. So we're expanding -- let's put it, we're expanding our scope to make sure that if we see something we really like that culturally fits, it's in an area we believe it's of high growth. We will attempt to acquire it.

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

Thank you, operator. I know that we had a couple of analysts that said that they would have trouble making it tonight. So we'll hope that you will join us next time. But let me thank everyone for participating in our third quarter earnings call, and we look forward to catching up again when we report the fourth quarter and fiscal year. Thank you.

Thank you. That does conclude today's conference. You may disconnect at this time, and thank you for joining.