The Hackett Group, Inc. Stock Price: Quote, Forecast, Splits & News (HCKT)

Perplexity Finance

HCKT

The Hackett Group, Inc.

HCKT

NASDAQ

Market Open

Monday, June 16, 2025

$24.65

+$0.55

2.26%

Jun 16, 1:48:51 PM EDT

Change

+$0.55

2.26%

Financial Profile

Prev Close

$24.10

Market Cap

$681.58M

Day Range

$24.26 - $24.71

Open

$24.37

P/E Ratio

29.3

52W Range

$21.12 - $34.02

24H Volume

$2.74M

Dividend Yield

1.83%

EPS

0.84

Earnings

Report Date

May 6, 2025

Reported Revenue

77.9M

Miss -3.82%

Avg 1d Change

7.53%

Report Period

Q1 2025

Reported EPS

0.41

Beat +2.5%

Implied Move 1d

16.38%

Transcript

12m 46s

Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and Chief Executive Officer of The Hackett Group, and myself, Rob Ramirez, Chief Financial Officer. A press announcement was released over the wires at 04:05PM Eastern Time. For a copy of the release, please visit our website at www.thehacketgroup.com. We will also place any additional financial or statistical data discussed on this call is not contained in the release of the Investor Relations page of our website. Before we begin, I'd like to remind you that 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 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. Thank you, Rob, and welcome everyone to our first quarter earnings call.

14m 3s

As we normally do, I will open up 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 and also provide guidance. We will then review our market and strategy related comments after which we will open it up to Q and A. This afternoon we reported revenues before reimbursements of $76,200,000 and adjusted earnings per share of $0.41 Near and at the high end of our quarterly guidance, respectively. Our results were driven by the performance of our DSBT segment which was driven by the strong performance of strong revenue growth from our GenAI engagements. GenAI engagements also favorably impacted our gross margin They demand a higher margin than our traditional consulting and implementation revenues and are driven by the highly differentiated capabilities of AI Explorer, and ZBrain platforms. As well as our implementation teams. Clients continue to move from awareness to budgeted projects a trend we expect to continue throughout the year. Total GSBT segment revenues were up over 6% or partially offset by weakness in our OneStream and e procurement practices. Excluding these practices, our GSBT segment was up 13%. We believe GenAI enabled transformation is a generational opportunity which will fundamentally change the way companies operate as well as the way consulting services are sold and delivered.

15m 37s

The Gen AI platform's capabilities of AIXplore version three with ZBrain's ability to orchestrate and build complex multi agent workflows is highly differentiated and allows us to compete strongly in this rapidly growing space. More importantly, most differentiating is the value realization speed of our combined end to end capability. AI Explorer's version three capability to dynamically identify AI solutions or use cases design client specific solutions, using Solution Explorer evaluate feasibility and determine the use case ROI, as well as suggest the required AI agents necessary to orchestrate the agenda workflow is powerful and unique. Combined with the multi agent orchestration capabilities of ZBrain, which allows our clients to build and deploy the AI solution at scale creates a powerful combination. It also allows us to serve clients enterprise wide from ideation to implementation in one fully integrated platform.

16m 50s

It also provides a client with a single platform which they can license to fully support their entire AI center of innovation which we refer to as AI COIs. As expected, our Oracle solutions was down but activities continues to be solid The segment was impacted by the wind down of a large post go live engagement which was partially offset by the continuing strength of the enterprise Performance Management or EPM activity. Resulting from Oracle's reestablishment of their dedicated EPM sales force. Our SAP Solutions segment was down against a strong Q1 bar comp from last year, but increasing demand for our market leading life sciences group and the related implementation revenues resulting from our increased software sales activity bodes well for this group in the second quarter as well as for the remainder of the year. We continue to see Gen AI opportunities emerge. Our early introduction of AI Explorer gave us a great opportunity to engage with hundreds of clients in 2024. These early demo meetings and conversations provided us with valuable AI adoption insight along with the implementation concerns of our prospects. These initial meetings also provide us an opportunity to propose new GenAI enabled transformation engagements with these clients that position us to serve these clients both strategically and broadly.

18m 20s

On the executive advisory front, we continue to invest in the growing and growing our IP based programs. We believe our move to fully integrate GenAI content which is now being further augmented by our GenAI content which was infused by the Leeway Hertz acquisition is being responsive to our client's strong interest in this area. We recently launched a premium GenAI solution solutioning advisory program with a nationally recognized AI leader to fully leverage our solutioning innovation and implementation knowledge from our platforms and client engagements. This program will be directly targeted to the AI leaders CIOs and CTOs who require this knowledge. On the balance sheet side in the near term, you can expect us to use our strong cash flow from operations to continue our stock buyback program rather than just focus on paying down remainder outstanding balance of our credit facility. While continuing to invest in our business. With that said, let me ask Rob to provide details on our operating results cash flow and also comment on outlook I will make additional comments on strategy and market condition following Rob's comments. Rob? Thank you, Ted. As I typically do, I'll cover the following topics. During this portion of the call.

19m 39s

I'll cover an overview of our first quarter results for 2025, 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 then conclude with a discussion on our financial outlook for the second quarter of twenty twenty five. For purposes of this call, I will comment separately regarding the revenues of our global SMPT segment our Oracle Solutions segment, our SAP Solutions segment, and the total company. Our Global SMBT segment includes the results of our North America and international Gen AI consulting and implementation licensing revenues, benchmarking and business transformation offerings, executive advisory, marketing intelligence and iPass programs, and our OneStream and e procurement implementation offerings. All Oracle Solutions and our SAP Solutions segments include the results of our Oracle and SAP offerings, respectively. Please note that we will be referencing both total revenues and revenues before reimbursements in our discussion. Reimbursable expenses are primarily project travel related expenses passed through to our clients and 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 discussions from this call to the Investor Relations page the company's website.

21m 16s

For the first quarter of twenty twenty five, our total revenue was 77,900,000.0 up 1% over the prior year. Our revenues before reimbursements were $76,200,000 which was near the high end of our quarterly guidance also up 1% over the prior year. The first quarter reimbursable expense ratio on revenues before reimbursement was 2.1% as compared to 2.3% in the prior year and 1.9% when compared to the same period in the prior year. Total revenues from our global SMVD segment were $43,400,000 for the first quarter of twenty twenty five. Revenues before reimbursements for our global SFT segment were $42,600,000 for the first quarter of twenty twenty five, an increase of 6% when compared to the same period in the prior year. Revenue growth from our Genii Consulting and Implementation offerings in this segment were partially offset by weaknesses in our OneStream and e procurement implementation offerings during the first quarter. Excluding that decrease, our global SMPT segment would have been up 13%. Total revenues from our Oracle Solutions segment were $21,100,000 for the first quarter of twenty twenty five. Revenues before reimbursements for our Oracle Solutions segment were $20,400,000 for the first quarter of twenty twenty five, a decrease of 3% when compared to the same period in the prior year.

22m 44s

This decrease is primarily due to the post go live wound count of a large catron as we discussed last quarter. Total revenues from our SAP Solutions segment were $13,400,000 for the first quarter of twenty twenty five. Revenues before reimbursements for our SAP Solutions segment were $13,200,000 for the first quarter of twenty twenty five, decrease of 8% when compared to the same period in the prior year as expected. This was primarily driven by strong software related sales in the quarter resulting from increased investments we made back in late twenty twenty three. The overall performance in the fourth quarter and in the first quarter results however, tempered our first quarter results. However, we expect demand for our SAP services to be strong throughout the balance of the year due to the implementation services that correspond to the volume of software sales from these last two quarters. Approximately 23% of our total company revenues before reimbursements consist of recurring, multiyear and subscription based revenues which includes our executive advisory, IT as a service and application managed services contracts. Total company adjusted cost of sales which exclude reimbursable expenses non cash stock based compensation expense and all acquisition related cash and non cash compensation totaled 43,100,000.0 or 56.6% of revenues before reimbursements in the first quarter of twenty twenty five.

24m 15s

As compared to 44,400,000.0 or 58.6% of revenues before re Christmas in the prior year. This decrease is primarily due decreased service costs related to selected headcount reductions in Global S-seventeen in prior year as well as decreased use of subcontractors in the quarter. Total company consultant headcount was $13.32 at the end of first quarter of twenty twenty five, as compared to total company consultant headcount of $12.84 in the previous quarter and $11.54 at the end of the first quarter of twenty twenty four. First quarter ending headcount was primarily driven by increases from our Geneta acquisition and increased hiring for our Gen AI practices. Total company adjusted gross margin on revenues before reimbursements which excludes reimbursable expenses and non cash stock based compensation expense, and all acquisition related cash and non cash compensation was 43.4% in the first quarter of twenty twenty five as compared to 41.4% the prior year. The improvement in gross margin was primarily driven by the higher margin Gen Consulting implementation revenue in the global SABT segment. Adjusted SG and A which excludes non cash stock based compensation expense, and all acquisition related cash and non cash expenses, amortization of intangible assets and one time legal settlements was 18,400,000.0 twenty four point one percent of revenues before reimbursements in the first quarter.

25m 56s

This is compared to 17,100,000.0 or 22.6% of revenues before reimbursements in the prior year. The year over year absolute dollar increase was primarily due to incremental costs associated with the legal and hertz and ZBrain acquisition completed in September 2024 and increased recruitment costs in our JEDI practices. Adjusted EBITDA, which excludes non cash stock based compensation expense, all acquisition related cash and non cash expenses amortization of intangible assets, and one time legal settlements was 15,700,000.0 twenty point seven percent of revenues before reimbursements in the first quarter compared to 15,200,000.0 or 20% of revenues before reimbursements in the prior year. GAAP net income for the first quarter of twenty twenty five totaled 3,100,000.0 diluted earnings per share of $0.11 as compared to GAAP net income of $8,700,000 diluted earnings per share of $0.32 in the first quarter of the previous year. First quarter twenty twenty five GAAP net income includes non cash stock compensation expense, from our stock price award program initiated in September of twenty twenty four. Of $5,100,000 and acquisition related cash and non cash compensation and related expenses of 2,400,000.0 which in total impacted our Q1 twenty twenty five GAAP results by point two three dollars Acquisition related cash and non cash compensation expense relates to a portion of the purchase consideration for the LiWayHertz acquisition completed in September 2024.

27m 42s

The consideration paid to the seller contains service, investing requirements, as such is reflected as compensation expense under GAAP rather than purchase consideration. Adjusted net income and diluted earnings per share which excludes non cash stock based compensation expense, all acquisition related cash and non cash expenses, amortization of intangible assets and one time legal settlements, for the first quarter of twenty twenty five totaled 11,600,000.0. Or adjusted diluted net income per common share of $0.41 which is at the top end of our earnings guidance range compares to prior year adjusted diluted net income per common share of $0.39 The company's cash balances were $9,200,000 at the end of the first quarter of twenty twenty five as compared to 16,400,000.0 at the end of our previous quarter. Net cash provided from operating activities in the quarter was 4,200,000.0 primarily driven by net income adjusted for non cash activity and partially offset by decreases in accrued expenses to the payment of twenty twenty four performance bonuses and increases in accounts receivable. Our DSO, or day of sales outstanding was seventy three days at the end of the quarter, as compared to sixty six days at the end of the previous quarter and sixty eight days in the prior year.

29m 12s

The increase in DSO is primarily due to extended terms and milestone deliverables on several large client engagements We currently expect a reduction in DSO in the second quarter of twenty twenty five. During the quarter, we repurchased 379,000 shares of the company stock for an average of $30.93 per share at a total cost of approximately 11,700,000.0 including purchases from employees to satisfy income tax withholding triggered by the vesting of restricted shares. Our remaining stock repurchase authorization at the end of the fourth quarter 21,300,000.0 During the quarter, company borrowed $5,000,000 from its credit facility. The balance of the company's total debt outstanding at the end of the first quarter was approximately 18,000,000 At his most recent meeting subsequent to quarter end, the company's board of directors declared a second quarter dividend of $0.12 per share for its shareholder of record on 06/20/2025, to be paid on 07/07/2025. Now moving to second quarter guidance, the company estimates total revenue before reimbursements for the second quarter of twenty twenty five to be in the range of 76 to 77,500,000.0. We expect global SMBT segment revenue before reimbursements to be up approximately 5% when compared to the prior year. We expect both Oracle Solutions and SAP Solutions segment on a combined basis revenue before reimbursements to be down when compared to the prior year.

30m 57s

We estimate adjusted diluted net income per share in the second quarter of twenty twenty five to be in the range of $0.37 to $0.39 which assumes a GAAP effective tax rate on adjusted earnings of 27%. We expect adjusted gross margin as a percentage of revenues before reimbursements be approximately 43% to 44%. We expect adjusted SG and A and interest expense the second quarter to be approximately 18,600,000.0 We expect second quarter adjusted EBITDA a percentage of revenues before reimbursements be in the range of approximately 21% to 22%. Lastly, we expect cash flow from operations to be up on a sequential basis. At this point, I'd like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months. Thank you, Rob. 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 in traditional areas, it continues to be impacted by thoughtful decision making as organizations assess competing priorities due to the economic concerns and the consideration of emerging Gen AI technologies. What is new is the increased uncertainty that tariff negotiations will have.

32m 23s

On client short term decision making. We continue to expect IT budgets to increase with increasing attention and allocations to the rapidly emerging Gen AI solutions and the related opportunities and threats it brings to all industries. While in 2024, Gen AI budgets were primarily focused on developing awareness in AI, in 2025, we expect to see an increased amount of AIT budgets specifically allocated to GenAI initiatives in high feasibility, high impact areas. We also expect to see an increasing investment in data quality and value initiatives which are also critical to any GenAI strategy. The unlimited potential of AI will define an entirely new level of GenAI enabled world class performance standards. Driving all software and services providers to extend the value of their existing offerings with the introduction of AI agent extensions. We believe this will result in unprecedented innovations which all organizations will have to consider. This shift is consistent with our impressive pivot to GenAI enabled transformation which we believe positions our company with unique value creation opportunities. Given the strategic access and proprietary and expanding platform capabilities of AI Explorer, it was natural for us to extend our AI implementation capabilities to be able to fully develop and implement GenAI solutions that we were identifying.

33m 53s

This resulted in our acquisition of Levi Hertz a highly recognized provider of advanced Gen AI solutions. The acquisition also included a sophisticated GenAI orchestration platform ZBrain, which we agreed to contribute into a joint venture with the founder of Leeway Hertz. The JV will bring together the AI Explorer and Zebra software platforms and will focus on licensing platforms and creating what we believe will be a first of its kind GenAI ideation through implementation software as a service offering. We believe this JV creates an entirely new value creation believe opportunity for our shareholders that should result from growth of ARR annual recurring licensing revenues. It should also allow the JV to have the opportunity to raise capital and achieve standalone valuations due to its GenAI software focus. Our acquisition of Leeway and Hertz combined with our AI Explorer and JennyEye Consulting capabilities is expected to have a consequential impact on our twenty twenty five results. With our meaningful market insights we continue to innovate and make powerful improvements to AI Explorer. And that's capital XPLR by the way. In fact, we recently released version three which brings significant enhancements that allow us to highly differentiate our offerings further.

35m 19s

The most important of the enhancements in version three is our ability to simulate an organization's enterprise GenAI solutions by leveraging Hackett's proprietary solutioning IP and identifying AI automation opportunities at a work step level. This enables us to identify thousands of GenAI solutions and to rapidly custom design and evaluate AI use cases prioritized by our clients. And also recommend the specific AI agents required to build these solutions. Our platform allows us to do this in a fraction of the time that other providers are offering. Our unique combination of strategic access to clients with the speed and solutioning provided by our platform is now attracting channel partners which could increase our ability to introduce our platforms. And related services at an and accelerate our growth. We have never been in a situation with such unique capability and complete assets to be able to take advantage of such a powerful technology revolution. We are utilizing the AIXplorer platform as the vehicle to integrate GenAI capabilities and impact across all of our offerings. We also continue to hire and upgrade our skills in critical data and tech architecture resources to further support our efforts. These efforts are rapidly allowing us to become key architects advisors and consultants of our clients' GenAI journey.

36m 54s

We now believe that GenAI enabled transformation augmented by AI Explorer will be our primary strategic entry point to clients. That we will use to position our traditionally strong benchmarking digital transformation and executive advisory offerings. And platforms that result in our largest digital transformation and cloud application consulting. Relationships. The halo effect or downstream revenue impact of these offerings has traditionally been around 40% over the last several years We believe this will only be expanded by our AI Explorer offering and the enterprise wide strategic access it provides. AI Explorer significantly enhances the value of our our IP and fully aligns it with the emerging GenAI world class performance standards. Another critical investment that we have made is to also build our own GenAI assisted knowledge base solution called AskHackIt.ai. We expect the integration of our valuable IP and content that leverages GenAI to significantly enhance the delivery of our insight that we are asked to provide to our clients every day but much faster and with significantly more personalized insight. We are ingesting proprietary IP including our benchmarking best practices, research IP to support the myriads of queries that are required to support our executive advisory and consulting clients as well as our own associates.

38m 24s

We have also embarked on a new initiative called [indiscernible] A I X E L E R A T O R. Which intends to also address the efficiency and quality of the delivery of our technology implementation services. All these initiatives are harnessing the power of GenAI to improve and accelerate the delivery of our solutions and services with the intent of differentiating our capabilities and result in improved revenue growth and margins. We also see the potential commercial value of these innovations beyond our internal use.

39m

On the talent side, competition for experienced executives with high technology agility continues. Overall, we saw turnover continue to moderate and remain low during quarter and we expect that trend to continue. We also continue to explore strategic relationships beyond the ones that I previously mentioned and acquisitions that will allow us to extend our Gen AI capabilities and seller IP through new channels that will allow us to reach beyond our current Global 1,000 focus in an efficient manner. As I previously mentioned on our calls, are continuing to add videos of our new and expanding platforms on the Investor Relations page of our website that investors can review and become more familiar with our new capabilities. Lastly, even though we believe that we have the client base and the offerings to grow our business we continue to look for acquisitions and alliances that strategically leverage our IP and add scope, scale and capability can accelerate our growth.

40m

As always, let me close by congratulating our associates on our innovation, and performance and by thanking them for their tireless efforts and always urge them to stay highly focused on our clients and people no matter what challenges we may encounter. Those conclude my comments. Let me turn it over to our operator and let us move on to the G and A, the Q and A section of our call. Operator, Thank you. Press 1, and record your first and last name. Fully and clearly when prompted. Our first caller is Jeff Martin with Roth Capital Partners. You may go ahead.

40m 39s

Thanks. Good evening, Ted and Robert.

40m 42s

Ted, I wanted to jump in by just asking you to elaborate on some of the client interactions you've had. With AI Explorer you know, what the pipeline looks for implementation projects and you mentioned you expect acceleration throughout the year How might that look as we progress into the back half?

41m 29s

Parties please stand by. We're not getting any sound from the speakers. One moment please.

41m 33s

I'm sorry. I'm sorry Jeff we were muted. Let me start again. Jeff, let me go back and specifically speak to the client interactions. What we continuously hear from the clients is the fact that our capabilities are very unique. Our ability to address ideation and evaluation, provide ROI [indiscernible] at a use case level, And [indiscernible] all of that ideation and evaluation and assessment to specific AI agents that would be required to build those solutions is incredibly unique. That ability that we created from the onset to be able to evaluate the automation opportunities at a work step level and build that into full simulation. Now industry process flows is very, very unique. That is why we continue to say we've never been in such a prepared and complete and powerful opportunity as an organization around such a powerful cycle. So what does that mean? I'm going to say that at least half of the times that we have that interaction the client engagement and discussions continue. We are we've been given an opportunity to provide proposals and win work and we're starting new relationships.

43m

So it's just a pretty it's just been a very, very favorable reaction from clients. What we now notice that is unique and new that we now notice that these large channel partners see how differentiated our capability is So the question for us is whether we continue to our own leads as we have been since the beginning of the we launched AI Explorer and as we continued since the acquisition of ZBrain, is whether we will do that with significantly larger channel partners. The inquiries that we've gotten from both large systems integrators as well as enterprise software companies that are aggressively trying to position themselves in the space is actually pretty surprising. But we believe, as I mentioned in our comments, that it's going to give us a chance to do something with some or a few of these partners that will allow us then to see more advance our opportunities and will allow us to do that with a broader entry point since some of them bring stronger technology relationships that Hackett has. So it's not only we think we will see more opportunities, but we'll be in front of the technology buyer as well as the business buyer who knows Hackett so well.

44m 33s

Very helpful.

44m 34s

And then towards the end of twenty twenty four, you had completed, I believe, correct me if I'm wrong, a a doubling of the implementation capacity on on the AI side of the business. Just curious you feel about your current capacity and what's your plan to scale that further perhaps in 2025 and 2026?

44m 58s

Yeah, it's probably closer to about 60% to 70% increase since acquisitions since we acquired, had some people that go and then we aggressively hired you can see from the G and A spend that Rob mentioned, we're hiring and adding more not only offshore, around the ZBrain and the Leeway Hertz team which are primarily based in and around New Delhi. But we've started to add market facing resources and capabilities on in The US to interact with some of our new engagement opportunities. So we're expanding both the TIF and we're expanding the back end of the capabilities.

45m 45s

Okay.

45m 45s

One more if I could and then I'll I'll pass it on. Could you give us an update on the progress of the joint venture with ZBrain? Are you signing ARR contracts? And you know, anything else you are prepared at the moment to disclose on that.

46m 1s

Well first let me answer the last part of your question. We are continuing to add licensed clients to the ZBrain platform and we are close to completing an executing the JV agreement. We expect to do that I don't know, we should be able to do that in the next thirty to forty five days.

46m 25s

Thank you.

46m 28s

And our next question comes from George Sutton with Craig Hallum. You may go ahead.

46m 35s

Thank you. Ted, we had a first on this call. You were silent for thirty seconds. No one has ever left you speechless. I found that interesting. So as a best practices consultant, in a environment that's going through huge change. I'm just curious how that how that potentially benefits your business, how that potentially challenges your business as we look forward.

47m 4s

Well we clearly you know, what we did expect at the beginning of the year would be to develop any campaign around economic disruption. If you said, hey, Tim, you were developing 2025 plan did you consider the fact that there could be some introduction [indiscernible] this ambitious tariff plan that could disrupt economic activity or at least allow clients to pause and consider the impact on them. The answer is no. So as that relates to our business model, while we've clearly started communicating with our clients that to the extent they want to hunker down a little while they're making any of these considerations and looking at the specific tariff related disruptions that obviously the nature of the work we do around strategic cost reduction and the deployment of addressing efficiency and effectiveness at the highest level We have brought that back out of our bag more aggressively than we expected in 2025. As it relates to the Gini related work, no, we think that the client engagement around GenAI related capability continues to improve believe those things are budgeted. Could budgeted ideas be disrupted by larger budgeted [indiscernible] could. But the interest, the engagement, the interaction both from the clients and the channel partners is very high.

48m 36s

You mentioned a consequential impact on '25 results from the AIX or I'm just curious if you can give us a better sense of what you mean by consequential.

48m 47s

To me I saw it one of two ways. First it's already been consequential. Because the Gen AI growth obviously on a year over year basis is is becoming more material each quarter. But the second consequence of in my mind in 2025 that I still expect to realize is that if we see the licensing revenues we haven't started to license Explorer yet, although the offer has been made out there and we expect the licensing of Explorer to start in July. Even though we wanted that to be quicker, but we're those who have a license interest in Explorer, we have this kind of ninety day kind of program which is a fully facilitated engagement. We could then result in a license And then the licensing activity in ZBrain has clearly started as well.

49m 41s

But to me the consequential impact would be that both that the growth in ARR becomes meaningful And that the JV then has the opportunity to explore if you want to call it, value accelerating activities like doing some kind of Series A round to fund a more accelerated growth in the JV itself and in the licensing of the platforms. So some combination of the impact we're already experiencing in Gen AI revenue growth which as we said is being offset like Rob said, GSVT would have been up stronger, but we have some of the enterprise application groups inside of GSBT offsetting. Some of that growth. If not, it would be more prominent or visible. We're already experiencing the revenue growth and higher margins We've started to drive license revenues, so we hope that that continues then to drive into the JV. And then the third that I believe consequential would be to bring in some combination of channel partners or investors who may also be channel partners into the JV and allowing that ARR pursuit to come with a much broader distribution channel. Those are the things and that's how we evaluate consequence to '25 as it relates to our and I opportunity.

51m 11s

Got you. One other question. When we think of the ideation to implementation, I assume in most cases, LH would be involved. Would can you share some example of kind of what the ideal situation has been And what, you know, you'd love to see implemented across a lot of other companies?

51m 37s

Ideal situation is the overwhelming majority of the clients were introduced to AI through Copilot. And some of what I will call it employee productivity or individual productivity initiatives. Driven around the deployment of Copilot or other if you want to call it, chatbot related extended AI opportunities. The major opportunities to deploy Gen AI is when you identify the enterprise wide opportunity for a company. So instead of saying a client saying, gosh, I'd like to get introduced to AI and let me pick an area that is of lower risk and lower ROI as a way of educating and launching our efforts. I would say that a majority of the clients are in that, what I call bottoms up process. Our value proposition comes by being able to engage clients top down providing the clients with an enterprise wide opportunity of the AI solutions And in a in the best scenarios that we've had is when the organization then says I'd like to pursue a basket But they clearly include the more breakthrough or transformative solutions that require some level of sophistication the way you bring data sources together to create a knowledge base of all clients to make decisions that they wouldn't ordinarily be able to make either as quickly or as precisely as you would expect.

53m 15s

So I call that exponential intelligence. In the middle layer of the solutions our clients then say, okay, I want to transform processes So you're looking for significant both improvements in efficiency and effectiveness I'm going to say that is where more of the ambitious opportunities are I would talk about the exponential intelligence opportunities to be those that have been moving to organizations the way you saw Clark that I mentioned on CNBC, some of the solutions that Palantir has taken on. But there's a myriad of those opportunities that go way beyond a Palantir, I'll call it a dedicated solution. And then at the bottom of those incremental is when you extend AI and just improve the capability and extend the capability of enterprise software its use, its analysis the way Salesforce has done so beautifully with Agentforce. And others are now trying to emulate that Salesforce lead. So perfect scenario. A client that looks at it top down, select sophisticated, middle of the road, transformative and incremental solutions And then you've got a client that's committing to a multi year plan. And you're talking of millions of dollars to build those that solution program out for the client.

54m 40s

And then for us, we would like for them to not only look at that opportunity broadly top down, but we see the combination of AI Explorer and ZBrain as I said, as positioning to the client's aid platform. We're telling the clients you don't have to build ideation and evaluation capabilities. Discovery ideation or evaluation capabilities. You don't need to build orchestration capabilities that allow you to deploy solutions at scale. You can license that capability from and have that end to end capability And that is the capability that you will see not surface but increasingly gain attention as the JV becomes more prominent.

55m 25s

Got you. Perfect. Thank you.

55m 28s

Thank you, George.

55m 30s

And our last question comes from Vincent Colicchio with Barrington Research. You may go ahead. [indiscernible] What portion of revenue excuse me, what portion of AI revenue was implementation revenue in the quarter, and how should that change going forward? [indiscernible] Rob is looking at me knowing that hasn't provided me this information. But I would estimate that it would be fifty-fifty if I have to say. [indiscernible] that fifty-fifty split as the business grows, the actual building and deployment of solutions should become significantly greater than the discovery ideation and evaluation of the opportunity. Multiples of it.

56m 18s

Okay. And are you seeing cross selling from your GenAI consulting clients into other services as of yet? The answer is yes. We've done it twofold. First, we want to make sure that our team stays focused on the traditional work because it's so it's such a significant part of our 2025 plan. So what's probably been most prominent for us is to provide a digital transformation engagement that [indiscernible] scan, a way to enhance that digital transformation initiative with something that would be more powerful and more ambitious that would come with a GenAI solution. But there is no doubt every time we walk into the client to have a conversation about GenAI you have a conversation of pain points those pain points refer specifically to, I'll call it more traditional digital transformation work we do So the answer is yes, it goes both ways. But we like obviously that we have bigger numbers in the traditional entry point and clients, traditional clients So that idea of taking clients from digital transformation to GenAI enabled transformation with the AI scan makes our opportunity enterprise wide. Makes the opportunity broader. I mean that would be a perfect path. For us to be able to start traditionally move into GenAI, and then leave a client with a complete AI CLI platform that supports all of their AI solution efforts.

58m 2s

And then how is the pipeline looking for Oracle and should we expect sequential flatness? Or any help on the direction of that, as we move through the year?

58m 17s

No, I think Rob said that Oracle and SAP would be down. I would expect Oracle's activity Oracle's activity is probably down. SAP's momentum is clearly up. Oracle's demand overall activity is solid. But as we mentioned, we're still trying to fill gaps from the large post go live engagement that we had in Q4 and into Q1. Okay.

58m 46s

Thank you.

58m 51s

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

58m 56s

Thank you, operator. Let me thank everyone for participating in our first quarter earnings call. We look forward to bringing everyone back up to speed in the one we have a chance to report the second Thank you for participating today.

59m 12s

And this concludes today's conference. Thank you for participating. May disconnect at this time and have a great rest of your day.

Key Insights

Q1 2025 revenues before reimbursements were $76.2M (up 1% YoY), and adjusted EPS was $0.41, both near the high end of guidance; results were driven by strong GenAI engagement growth, partially offset by weakness in OneStream and e-procurement practices.
GenAI-related offerings (AI Explorer and ZBrain platforms) are highly differentiated, driving higher gross margins and positioning the company for enterprise-wide, end-to-end AI transformation projects; GenAI consulting and implementation revenue in the GSBT segment grew 13% YoY excluding weaker practices.
Adjusted gross margin improved to 43.4% (from 41.4% YoY), and adjusted EBITDA was $15.7M (20.7% of revenues before reimbursements); GAAP net income was $3.1M ($0.11 per share), impacted by non-cash stock compensation and acquisition-related expenses.
Q2 2025 guidance: revenues before reimbursements expected between $76M–$77.5M, adjusted EPS of $0.37–$0.39, adjusted gross margin of 43–44%, and adjusted EBITDA margin of 21–22%; cash flow from operations expected to increase sequentially.
Strategic focus remains on expanding GenAI capabilities, scaling implementation capacity, and leveraging joint ventures (notably with ZBrain) to drive ARR growth; licensing of AI Explorer is expected to begin in July, with meaningful impact anticipated for FY25 results.

Recent Transcripts

GenAI-driven growth drove Q1 revenue and margin gains, offsetting legacy segment weakness.

+6% (excl. weak areas +13%)

Q4 revenue and EPS exceeded guidance, driven by GenAI and SAP segment outperformance.

$0.47 (above guidance)

Income Statement

Revenue

	2021	2021	2022	2023	2024
Revenue	$279M	$279M	$294M	$297M	$314M
Cost of Revenue	$173M	$173M	$178M	$180M	$191M
Gross Profit	$106M	$106M	$116M	$116M	$123M
Gross Profit %	38%	38%	39%	39%	39%
R&D Expenses	$0	$0	$0	$0	$0

2021

2022

2023

2024

Revenue

$279M

$294M

$297M

$314M

Cost of Revenue

$173M

$178M

$180M

$191M

Gross Profit

$106M

$116M

$123M

Gross Profit %

38%

39%

R&D Expenses

Cash Flow

Net Income

	2021	2021	2022	2023	2024
Net Income	$42M	$42M	$41M	$34M	$30M
Dep. & Amort.	$4.4M	$4.4M	$3.4M	$3.4M	$3.9M
Def. Tax	$1.5M	$1.5M	-$480K	$1.4M	-$346K
Stock Comp.	$10M	$10M	$10M	$11M	$20M
Chg. in WC	-$11M	-$11M	$6.1M	-$13M	-$6M

2021

2022

2023

2024

Net Income

$42M

$41M

$34M

$30M

Dep. & Amort.

$4.4M

$3.4M

$3.9M

Def. Tax

$1.5M

-$480K

$1.4M

-$346K

Stock Comp.

$10M

$11M

$20M

Chg. in WC

-$11M

$6.1M

-$13M

-$6M

Balance Sheet

Cash

	2021	2021	2022	2023	2024
Cash	$46M	$46M	$30M	$21M	$16M
ST Investments	$0	$0	$0	$0	$0
Cash & ST Inv.	$46M	$46M	$30M	$21M	$16M
Receivables	$51M	$51M	$48M	$52M	$57M
Inventory	$0	$0	$0	$0	$0

2021

2022

2023

2024

Cash

$46M

$30M

$21M

$16M

ST Investments

Cash & ST Inv.

$46M

$30M

$21M

$16M

Receivables

$51M

$48M

$52M

$57M

Inventory

Go Deeper

Financial information provided by Financial Modeling Prep. Options data provided by Unusual Whales. Live transcripts provided by Quartr. Reported revenue and EPS data from Earnings powered by FinChat.io. All data is provided for informational purposes only, and is not intended for trading purposes or financial, investment, tax, legal, accounting or other advice.

Market Cap: $682M
IPO Date: 5/28/98
CEO: Mr. Ted A. Fernandez
Fulltime Employees: 1.6K
Sector: Technology
Industry: Information Technology Services
Country: US
Exchange: NASDAQ Global Select

Peers

Information Services Group, Inc.

Heritage Financial Corporation

$22.87

HFWA

0.48%

CRA International, Inc.

$182.66

CRAI

1.09%

Heritage-Crystal Clean, Inc

Watchlist

Earnings

Report Date

May 6, 2025

Reported Revenue

77.9M

Miss -3.82%

Avg 1d Change

7.53%

Report Period

Q1 2025

Reported EPS

0.41

Beat +2.5%

Implied Move 1d

16.38%

Transcript

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25m 56s

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36m 54s

38m 24s

39m

40m

40m 39s

Thanks. Good evening, Ted and Robert.

40m 42s

41m 29s

Parties please stand by. We're not getting any sound from the speakers. One moment please.

41m 33s

43m

44m 33s

Very helpful.

44m 34s

44m 58s

45m 45s

Okay.

45m 45s

46m 1s

46m 25s

Thank you.

46m 28s

And our next question comes from George Sutton with Craig Hallum. You may go ahead.

46m 35s

47m 4s

48m 36s

You mentioned a consequential impact on '25 results from the AIX or I'm just curious if you can give us a better sense of what you mean by consequential.

48m 47s

49m 41s

51m 11s

51m 37s

53m 15s

54m 40s

55m 25s

Got you. Perfect. Thank you.

55m 28s

Thank you, George.

55m 30s

56m 18s

58m 2s

And then how is the pipeline looking for Oracle and should we expect sequential flatness? Or any help on the direction of that, as we move through the year?

58m 17s

58m 46s

Thank you.

58m 51s

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

58m 56s

59m 12s

And this concludes today's conference. Thank you for participating. May disconnect at this time and have a great rest of your day.

Key Insights

Q1 2025 revenues before reimbursements were $76.2M (up 1% YoY), and adjusted EPS was $0.41, both near the high end of guidance; results were driven by strong GenAI engagement growth, partially offset by weakness in OneStream and e-procurement practices.
GenAI-related offerings (AI Explorer and ZBrain platforms) are highly differentiated, driving higher gross margins and positioning the company for enterprise-wide, end-to-end AI transformation projects; GenAI consulting and implementation revenue in the GSBT segment grew 13% YoY excluding weaker practices.
Adjusted gross margin improved to 43.4% (from 41.4% YoY), and adjusted EBITDA was $15.7M (20.7% of revenues before reimbursements); GAAP net income was $3.1M ($0.11 per share), impacted by non-cash stock compensation and acquisition-related expenses.
Q2 2025 guidance: revenues before reimbursements expected between $76M–$77.5M, adjusted EPS of $0.37–$0.39, adjusted gross margin of 43–44%, and adjusted EBITDA margin of 21–22%; cash flow from operations expected to increase sequentially.
Strategic focus remains on expanding GenAI capabilities, scaling implementation capacity, and leveraging joint ventures (notably with ZBrain) to drive ARR growth; licensing of AI Explorer is expected to begin in July, with meaningful impact anticipated for FY25 results.

Earnings

Report Date

Reported Revenue

Avg 1d Change

Report Period

Reported EPS

Implied Move 1d

Transcript

Key Insights

Recent Transcripts

Income Statement

Cash Flow

Balance Sheet

Go Deeper

Related

Recent Transcripts

Go Deeper

Earnings

Report Date

Reported Revenue

Avg 1d Change

Report Period

Reported EPS

Implied Move 1d

Transcript

Key Insights