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. 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 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. 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 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 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 first quarter earnings call. As we normally do, I will open the call with some overview comments on the quarter. 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 and strategy-related comments, after which, we will open it up to Q&A. This afternoon, we reported total revenues of $77.2 million and revenues before reimbursements of $75.7 million, which is above the high end of our guidance and adjusted earnings per share of $0.39, which was at the high end of our guidance. Our results were driven by the overperformance of both our Oracle and SAP segments, which were up strongly. Oracle's overperformance is consistent with the momentum that we have experienced since the second quarter of last year. A new important development is the notable increase in the demand that we're experiencing in our historically strong Enterprise Performance Management or EPM offerings. Oracle has reemphasized its sales commitment to this area and we are clear beneficiaries of this strategy. Our SAP Solutions segment also performed above our expectations as it closed several value-added reseller transactions, which strongly benefited the quarter. We have started to see some of the sales investments we made in this segment last year start to pay off. Our Global SBT segment was down 3% when compared to last year, as we see economic headwinds continued results in extended decision-making. This has been particularly noticeable in the eProcurement area. Although segment was impacted by market conditions and new Gen AI investment considerations, we are experiencing the significant opportunity that comes from the unlimited transformational use cases that Gen AI initiatives will offer. More importantly, our recently launched Gen AI…

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 2024 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. I'll then conclude with a discussion on our financial outlook for the second quarter of fiscal 2024. For the purpose of this call, I will comment separately regarding the revenues of our Global S&BT segment, our Oracle Solutions segment, our SAP Solutions segment and the total company. Our Global S&BT segment includes the results of our North America and international benchmarking and business transformation offerings, executive advisory and IPaaS programs and our OneStream and Coupa implementation offerings. Our Oracle Solutions and our SAP Solutions segments include the results of our Oracle and SAP offerings prospectively. Please note that we will be referencing both total revenues and revenue before reimbursements in this portion of the discussion. Reimbursable expenses are primarily project, travel-related expenses passed through to our clients that have no associated impact on our profitability. During our call today, we will also reference certain non-GAAP financial measures, which we believe provide useful information to investors. We have included reconciliations of GAAP to non-GAAP financial measures in our press release filed earlier today and will post any additional information based on the discussion from this call to the Investor Relations page of the company's website. For the first quarter of 2024, as Ted mentioned, our total revenue was $77.2 million, up 8% over the prior year. Our revenues before reimbursements were $75.7 million, which was above the high end of our quarterly guidance, also up by 8% over the prior year. The first quarter reimbursable expense ratio on revenues before reimbursements was…

As we look forward, let me share our thoughts on the near- and long-term demand environment and the growth opportunity it offers our organization. Although demand for digital transformation remains strong, it continues to be impacted by extended decision-making as organizations assess competing priorities created by high interest rates and the demand disruption, it is intended to affect. Digital innovation and enterprise cloud applications, analytics and AI workflow automation are dramatically influencing the way businesses compete and deliver their services. But as I mentioned on our first quarter call, the major change has been the rapidly emerging demand for Gen AI solutions. Its unlimited potential will define an entirely new level of digital world-class performance standards, driving all software and services providers to extend the value of their existing offerings. We believe this will result in unprecedented innovations, which all organizations will have to consider. Strategically, we continue our focus on recurring high-margin IP-related services by increasing the development of new programs and the sales and marketing resources dedicated to this area. We also continue our investment on our new Hackett Connect member platform. But what is new is the accelerated focus and investment we're making in our Gen AI capabilities. The most significant investments have been the development of our AI Explorer platform and then the training and development of our associates. We are utilizing the AI Explorer platform as the vehicle to integrate the Gen AI impact across all of our offerings. We have also hired critical data and technology architecture resources to further support our efforts. These efforts will allow us to become critical architects advisers and consultants of our clients' Gen AI journey. Our ability to measure and assess the impact of Gen AI utilizing AI Explorer is powerful. Additionally, our growing use case repository, which…

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Jeff Martin with ROTH Capital Partners.

Ted, I was curious if you could quantify the level of investment you're making related to Gen AI and specifically Explorer?

Believe it or not, the majority of the investment we're making is really reallocating and refocusing all of our senior executives to the initiative. We have hired a dedicated team that has built that AI Explorer, but we've done that, I believe, incredibly efficiently. That was primarily because we had the ability to leverage other capabilities we had built during the RPA development era that we've been able to leverage and build AI Explorer from what's incredible, even though it's interesting, even though the impact -- revenue impact on the quarter was nominal, I can tell you that the amount of time and effort we're expanding in building out Explorer, communicating the value to clients, booking and responding to the demo meetings is like nothing we've ever done before. We've never launched a product like that, that has received the kind of market response and has resulted in the number of meetings and the number of pursuits that we continue -- discussions and pursuits, we continue to have with those individuals who have seen our product. The feedback has been outstanding. So for us, even though Gen AI to some extent, is somewhat of a moving target and a little bit of a distraction to our clients as they now try to understand how to reallocate their spend relative to the impact and the priorities they want to establish with or without Gen AI, the opportunity, we believe, is significant, and we believe that the launch of AI Explorer and the timing of it is going to pay off handsomely for us.

I was just curious if you could give us an example or 2 about the types of client interactions you have, what parts of the organization these are targeting? I'd imagine they start with one part of the organization and expand that over time. I just wanted to give you the opportunity to expand on that.

We make the offer to the organization as we've reached out to our client base. It has been primarily through C-level officers. I will say that probably 1/3 or maybe 40% of the time, it includes the CIO or somebody from the IT organization, but it really is across the board. And even though our primary offering has been on functionally domain-focused initiatives because we believe that if one C-level officer is exposed to our capabilities, it will quickly spread throughout the organization. We are getting and seeing the opportunity to, in fact, engage and present the capabilities to executive management teams and it's been an offer, we're going to continue to pursue because we know the impact from that conversation becomes more impactful. In fact, one of the engagements that we closed was presented and sold at the C-level officer and it's a very meaningful project.

And then one more, if I could. On the Global S&BT, delayed decision-making, if we back up 2 or 3 quarters, you thought that, that had largely run its course, appears not to be the case. Just curious if you have anything to add with respect to when we might see decision-making kind of clear up? Is this something they can put off for an indefinite period of time? Or do you see there being a pinch point where they have to move forward?

I believe that they will move forward, but I also believe that the amount of budget that's being reallocated or identified as AI-specific will consume a significant amount of that attention. So for us, let's call the Gen AI diversion, we believe to be temporary simply because the number of conversations we're having on broad initiatives, which have broad business transformation impact should increase throughout the balance of the year. I think it's also probably important to note that when you look at the overall decrease that we have experienced over the last couple of quarters, the fiery impact has come from our eProcurement area. So areas in spend analysis, which you remember like Coupa that were significant, maybe 24 months ago have seemed to struggle more than others. But the other, if you want to call it, variances or decreases have really have been nominal if you exclude that. So, we've been watching that activity level off. We think of that activity in eProcurement levels off you will see the SBT segment level off as well. And then if we get the expected impact from the new engagements, we're presenting -- utilizing the AI Explorer demo then you'll see that growth resume and resume with much longer-term opportunities because, I mean, the Gen AI opportunities is, we're talking about very initial engagements that if you have the right entry point and at the right level, it could be significant in multiyear.

[Operator Instructions] Our next question comes from George Sutton with Craig-Hallum. And George, we're not able to hear you in conference. Please check the mute feature on your phone.

This is Adam on for George. Ted, you mentioned that Oracle has reemphasized its sales commitment. I was hoping you can provide just a little more detail on that and what you expect to come from that effort?

Well, the momentum that we built through the balance really over the last 4 quarters has had quite a bit to do with the fact that they've really started to rebuild their dedicated EPM sales force and it seems to have -- we have such a strong reputation in that space, not only in the space broadly but in the install base itself that we've been significant beneficiaries of that activity. Those entry points and that -- I was going to call it that success is also bleeding over into, I'm going to call it, meaningful ERP opportunities for us as well. So, the growth prospects, both the quarterly performance and the guidance we provided for Oracle were very strong.

And obviously, clean data is key for Gen AI. I have to imagine at some point, we may see an impact on EPM or ERP sales. I would love to get your thoughts on it, though.

Well, interesting, it's really just reemphasizes the opportunity so that if you look at EPM or FP&A in general, the analytics opportunities within FP&A in Gen AI are really very significant. So, the software providers, I think, have been aggressively marketing their capabilities, their embedded capabilities -- but the innovation and the use cases that we're starting to see that extend beyond embedded are very significant. So, I believe that there will be significant beneficiaries of the Gen AI solutions, if you want to call it, breakthrough.

Thank you. Next, we will hear from Vincent Colicchio with Barrington Research.

Yes, Ted, with the strong AI consulting demand you're seeing and you had mentioned you are training professionals internally. Do you need to do more hiring outside the organization to meet demand currently?

The answer is yes. We are going to continue to train and certify our associates where we have increased our hiring for dedicated expertise that looks -- that extends beyond and we're also looking at partnerships and alliances and even beyond that to extend our capabilities. So, you can expect it to be aggressive across all dimensions.

And I think that Rob had mentioned that your SG&A was partly up on sales. Did you expand your sales force in the quarter?

The answer is the increase reflects the combination of sales increases we made in some of the -- in the software segments, but it also reflects the increased year-over-year increases that we had -- that we've made in the executive advisory dedicated team.

So, the investments in the executive advisory team and the market intelligence investments you've made, do you expect them to help offset some softness in GSBT this year? Or is in a meaningful way? Or what is your thinking there?

We see the same impact in advisory. If you look at the -- I'll call it lower growth result, Gartner just reported, I would say that we see the advisory space being impacted exactly as the business transformation space is. With that said, that also means that the shift in demand for Gen AI-related content advice specific capabilities that our clients are now requesting the ability for us to do that, which we didn't start integrating until April because we were building the content. So, we just started adding it to our program is an important part of the growth of advisory. So, we expect that change to impact the growth in executive advisory and market intelligence programs. But overall, the ability to position the organization and pivot, I believe as strongly as we have and demonstrate unique capabilities with AI Explorer to the Gen AI space will bode very well for us and will be the leading and most significant factor of revenue growth over the next 3 to 5 years. So, we're going to play that hand very aggressively.

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

Thank you, operator. Let me thank everyone for participating in our first quarter earnings call. We look forward to updating you again when we report the second quarter. Thank you.

Thank you. That does conclude today's conference. Thank you once again for your participation. You may disconnect at this time.