The Hackett Group, Inc. (HCKT)

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Hackett Group, Inc. (HCKT)

Q1 2009 Earnings Call

May 11, 2009 5:00 pm ET

Executives

Robert A. Ramirez - Chief Financial Officer & Executive Vice President, Finance

Ted A. Fernandez - Chairman of the Board & Chief Executive Officer

Analysts

George Sutton – Craig-Hallum Capital

Mickey Schleien – Ladenburg Thalmann & Co.

William Sutherland - Boenning & Scattergood, Inc.

Operator

Welcome to The Hackett Group first quarter earnings. (Operator Instructions) Hosting tonight’s call are Mr. Ted Fernandez, Chairman and CEO and Mr. Rob Ramirez, Chief Financial Officer. Mr. Ramirez you may begin.

Robert Ramirez

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, Robert Ramirez, CFO. A press announcement was released over the wires at 4:05 pm ET. 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. 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.

Ted Fernandez

Thank you Rob. Welcome everyone to the Hackett Group’s first quarter earnings call. For the quarter we reported revenues of $39.5 million and pro forma EPS of $0.03, both in line with our guidance. As expected, the results reflect the impact from the volatile economic environment which our clients are experiencing across the U.S. and European markets that we serve.

As we noted in February when we provided our Q1 guidance, although pipeline activity is healthy clients are taking longer to make decisions and they are also doing what they can to reduce the size of their commitments to external providers. Overall, client indecision is reducing the pace at which we normally convert pipeline to active contract and report revenues.

As we entered the year our plan assumed that Q1 would be a bottom relative to revenues but given the volatility in client decision making and the lack of broad market improvement reflected in GDP from Q4 to Q1 we are now hoping to see client activity bottom in Q2 and for revenues to stabilize in Q3.

With the revised plan in mind we have taken cost reduction actions that will allow us to continue to invest in our people and our offerings while maintaining an appropriate level of profitability during the year. If revenue stabilizes in the second half of the year, these actions will provide the opportunity to show noticeable improvement in our operating results in the second half of the year. We also believe that these actions will provide sustainable operating leverage when our growth re-emerges.

As expected in Q1 our Hackett Technology Solutions was impacted more significantly by the market environment. We continue to see good pipeline activity but experienced the same client indecision as we experienced in our other offerings. In this environment it is more difficult for clients to make decisions on initiatives with longer benefit realization time frames. Having said that, current client activity is such that an equal opportunity exists for our Technology Solutions Services to stabilize in Q3 as there is for our non-technology offerings.

As I mentioned last quarter we will continue to ensure that our clients understand that our unique, best-practice intellectual capital and implementation expertise to allow them to accelerate the change they must make to improve their performance especially in this environment. Although we are planning for a challenging 2009 environment we are also making sure that we build on the great momentum we have created over the last several years. We will continue to expand our brand permission and improve in all aspects of our go-to-market execution so that we can be responsive to our clients’ needs regardless of the economic environment that they face.

As we tell our clients, standing still is not an option. It is important to take the necessary actions to ensure that your competitive position is strengthened during this period. I will comment further on the market conditions and our specific go-to-market initiatives but let me first ask Rob to provide details on our operating results, cash flow and also comment on outlook.

Robert Ramirez

Thank you Ted. Good evening everyone. I plan to cover the following four main topics this evening: An overview of our 2009 first quarter results along with an overview of key operating statistics, a break down of our 2009 first quarter revenue, an overview of our cash flow activity during the quarter and I will then conclude with a discussion on our financial outlook for the second quarter of 2009.

For purposes of this call any references to Hackett Group will specifically exclude Hackett Technology Solutions. Correspondingly I will comment separately regarding the financial results of The Hackett Group, Hackett Technology Solutions and the total company. Please not that all references to gross revenues in my discussion represent net revenues plus reimbursable expenses. For purposes of today’s call, I will provide most of my comments on net revenues or revenue before reimbursements.

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