The Hackett Group(US:HCKT)2019-08-11 08:00Financial Data and Key Metrics Changes - The company reported net revenues of $68 million for Q2 2019, which is a decrease of 1.1% year-over-year but at the midpoint of revenue guidance [20][30] - Pro forma earnings per share were $0.28, at the high end of guidance, compared to $0.27 in Q2 2018 [30] - Gross revenues from continuing operations were $73.5 million, representing a year-over-year decrease of 1.3% [21] - Pro forma gross margins were 39.9% of net revenues, an increase from 38.7% in the prior year [27][30] Business Line Data and Key Metrics Changes - The Strategy and Business Transformation (S&BT) Group net revenues were $35.7 million, up 7.4% sequentially but down 5.6% year-over-year [22] - The EEA solutions group net revenues were $32.3 million, an increase of 4.4% year-over-year and up 10.9% sequentially, driven by strong Oracle cloud revenue growth [23] - The U.S. Oracle practice within EEA saw cloud revenue growth exceeding 30% year-over-year, with cloud revenue now approximately 69% of total implementation revenue [24] Market Data and Key Metrics Changes - International net revenues accounted for 16% of total revenues in Q2 2019, down from 19% in the previous year [24] - The company experienced a decline in international revenues of over 20% in Q2, impacting overall growth [10][22] Company Strategy and Development Direction - The company is focusing on digital transformation and cloud implementation as key growth drivers, with significant investments in platforms like Quantum Leap and the Digital Transformation Platform (DTP) [12][47] - The long-term strategy includes building brand offerings around digital transformation and leveraging unique intellectual property [44][50] - The company is actively seeking acquisitions and alliances to enhance its growth potential [50] Management's Comments on Operating Environment and Future Outlook - Management noted that the demand environment is favorable due to rapid developments in digital transformation and enterprise cloud applications [41][42] - The company expects U.S. revenue growth of 5% to 10% in Q3, but international revenues are anticipated to decline by approximately 20% [36][37] - Management expressed optimism about the future, citing strong growth in cloud offerings and the potential for improved performance in the latter half of the year [51][85] Other Important Information - The company generated $11.3 million in cash from operating activities during Q2 2019, with cash balances increasing to $16.7 million [32][33] - The company repurchased 93,000 shares at a cost of approximately $1.5 million during the quarter [34] Q&A Session Summary Question: Insights on European Market Engagement - Management indicated that clients in Europe are deferring decisions due to uncertainty, impacting revenue growth [56][58] Question: Growth in Oracle Cloud Engagements - Management confirmed that the size of engagements has increased, with the ERP business growing at a higher pace than EPM [59][60] Question: Progress with Non-Oracle EPM Providers - Management reported positive progress with partnerships, expecting revenue growth in Q3 [63] Question: Impact of Digital Transformation Platforms - Management emphasized the significance of Quantum Leap and DTP in differentiating the company and driving growth [71][72] Question: Follow-on Opportunities from Multiyear Contracts - Management estimated that follow-on opportunities from significant benchmarking exercises could range from 25% to 50% of the original contract [76] Question: Monthly Revenue Cadence - Management noted strong sequential growth momentum from Q2, despite expected reductions in available days due to summer vacations [77]