The Hackett Group, Inc. (HCKT)

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Hackett Group, Inc. (HCKT)

Q2 2009 Earnings Call

August 11, 2009 5:00 pm ET

Executives

Robert A. Ramirez - Chief Financial Officer

Ted A. Fernandez - Chief Executive Officer

Analysts

George Sutton – Craig-Hallum Capital

William Sutherland - Boenning & Scattergood, Inc.

Mickey Schleien – Ladenburg Thalmann & Co.

Morris Ajzenman - Griffin Securities, Inc.

Presentation

Operator

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

Robert A. Ramirez

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, 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 Web site 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 Web site.

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 A. Fernandez

Welcome, everyone, to our call. As I customarily do, I will start the call by making some overview comments relative to the quarter. I will then turn it over to Rob and ask him to comment on the detailed operating results, address cash flow details, and then also address our guidance for the following quarter. Rob will then turn it back over to me, I will make some comments relative to the market, and some of the strategic responses that we are focusing on, and then we'll open it for Q&A.

So having said that, let me again start by welcoming everyone to the Hackett Group's second quarter earnings call.

For the quarter we reported revenues of $34.6 million and pro forma EPS of $0.02, both in line with our guidance. As expected, our results reflect the impact from the volatile economic environment, which our clients are experiencing across the U.S. and international markets that we serve.

However, as our Q3 guidance indicates, we now believe that revenues will stabilize, or be up, sequentially in the upcoming quarter, which will allow us to benefit from the cost management actions that we have taken to date.

As we noted in early May when we provided our Q2 guidance, although our client pipeline activity is healthy, clients are simply taking longer to make decisions and in general, they are making smaller commitments. Initiatives that do not have credible ROI targets but with longer benefit-realization time frames, are more difficult to get approved.

Accordingly, even though all of our practice groups were impacted by the current environment, our Hackett Technology Solutions projects, which typically have longer benefit realization time frames, were impacted more significantly in the quarter. However, based on current pipeline activity, as I mentioned before, we now expect both Technology Solutions and Hackett Group revenues to stabilize and be flat to up in the quarter.

During the quarter we also started to see the benefits of our efforts to engage clients more strategically around the design and implementation of global operating platforms, or as we refer to it internal, our client service delivery models. This focus resulted in several large key wins that will benefit our results for the balance of the year.

We are also encouraged by improving GDP figures in the markets that we serve, along with improved client decision making that we saw during the second quarter.

Although we have had to take difficult cost-reduction actions, we are pleased that the actions we are taking are allowing us to continue to invest in our people, in our offerings, while maintaining an appropriate level of profitability and cash flow under difficult market conditions. This will allow us to reward high-performing associates while also protecting our shareholders' interest.

We also believe that many of these actions provide sustainable operating leverage that we will be able to benefit from as our revenue growth re-emerges.

As I mentioned last quarter, we will continue to ensure that our clients understand that our unique, best-practice intellectual capital and implementation expertise allows them to accelerate the change they must make to reduce costs and improve cash flows while improving operating excellence.

This requires operating agility that many organizations simply do not have. Along with cost reduction and cash flow improvement, the ability to sustain these benefits as growth stabilizes and re-emergence is becoming an increasing area of focus for our clients. A lot of them are simply being questioned by their shareholders for the cost reductions and actions you have taken to create real operating leverage for the balance of the year and in 2010 and beyond. This type of change requires operating excellence, not just brute force. This is where we believe our offerings excel.

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