The Hackett Group(US:HCKT)2022-08-13 22:14Financial Data and Key Metrics Changes - Total revenues for Q2 2022 were $75.9 million, up 4% year-over-year, and up 12% when excluding prior year software sales [22] - Adjusted earnings per share were $0.38, above quarterly guidance and representing a 27% increase year-over-year when excluding the prior year software sales transaction [33] - Adjusted EBITDA was $17.6 million, or 23.6% of revenues before investments, compared to 24.6% in the prior year [32] Business Line Data and Key Metrics Changes - Revenue from the Strategy and Business Transformation (S&BT) Group increased by 24.5% year-over-year to $32.9 million [24] - The EEA Solutions group saw revenues decrease by 11% year-over-year to $36.1 million, but increased by 2.5% when excluding the prior year software sales transaction [24] - International Group revenues were $5.7 million, down 5% year-over-year [25] Market Data and Key Metrics Changes - U.S. operations represented 92% of revenues before reimbursements, up 3% year-over-year [23] - Approximately 20% of total revenues before reimbursements consisted of recurring and subscription-based revenues [26] Company Strategy and Development Direction - The company is focusing on accelerating high-margin IP-related services and plans to launch three to four new market intelligence programs by year-end [46] - Investments in digital transformation initiatives are expected to drive long-term growth and profitability [42] - The company is exploring strategic partnerships to enhance its IP and reach beyond its current Global 1000 focus [48] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for digital transformation initiatives, which is reshaping competitive dynamics in the industry [42] - The company expects to see a leveling off of EEA performance in Q3, with a return to year-over-year growth anticipated in Q4 [54] - There are no direct signs of economic headwinds affecting the EEA business, although the company is monitoring sales cycles closely [79] Other Important Information - The company declared a third-quarter dividend of $0.11 per share, payable on October 7, 2022 [37] - Cash balances increased to $61.7 million at the end of Q2 2022, compared to $47.8 million at the end of the previous quarter [35] Q&A Session Summary Question: Can you discuss the dynamics affecting Q3 performance? - Management indicated a 3% reduction in available days and noted that the SAP practice is expected to see a favorable impact in Q3 from deals that are coming to fruition [53] Question: Can you provide details on the IPaaS deal? - The IPaaS deal is transformative, allowing the client to utilize Hackett's data and platforms for value propositions and project tracking [56][59] Question: What are the implications of the IP-as-a-Service offering on profit growth for 2023? - Management highlighted that IP-as-a-Service deals are significant and can lead to high-margin, multi-year contracts, contributing positively to gross margins [66][70] Question: How is the company balancing demand versus talent availability? - The company has experienced higher turnover but has leveraged offshore resources and reduced travel requirements to attract talent from a broader pool [75] Question: Are there any signs of economic headwinds in the EEA business? - Management stated that activity remains strong and there are no direct correlations to economic slowdowns affecting the EEA business [79]