The Hackett Group(HCKT) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q4 2024 were $79.2 million, exceeding quarterly guidance, with adjusted earnings per share of$ 0.47, also above guidance [8][26]. - Adjusted net income for Q4 2024 was $13.6 million, or adjusted diluted net income per share of$ 0.47, compared to $0.39 in the prior year [35]. - Total company adjusted gross margin was 47.7% in Q4 2024, up from 43.3% in the prior year [32]. Business Line Data and Key Metrics Changes - Global S&BT segment revenues were$ 43.9 million, a 4% increase year-over-year, driven by Gen AI consulting, offset by weakness in eProcurement [27][28]. - Oracle Solutions segment revenues were $18.2 million, a 6% decrease year-over-year, primarily due to the wind down of a large engagement [28]. - SAP Solutions segment revenues were$ 17.2 million, a 51% increase year-over-year, driven by strong software-related sales [29]. Market Data and Key Metrics Changes - Approximately 22% of total revenues before reimbursements consist of recurring multi-year and subscription-based revenues [30]. - The company expects strong demand for SAP services throughout 2025, despite a tempering outlook for Q1 2025 [40]. Company Strategy and Development Direction - The company is focusing on Gen AI-enabled transformations, viewing it as a generational opportunity for value creation [11][45]. - Strategic investments are being made in the AI XPLR platform and the training of associates to enhance Gen AI capabilities [46][48]. - The acquisition of LeewayHertz is expected to accelerate efforts in Gen AI and enhance the company's offerings [17][18]. Management's Comments on Operating Environment and Future Outlook - Management anticipates an increase in IT budgets for Gen AI initiatives in 2025, moving from awareness to budgeted projects [44]. - The company expects to see velocity in the pipeline as clients are better prepared and budgeted for Gen AI initiatives [78]. - There is an expectation of continued strong demand for digital transformation services, despite economic concerns [43]. Other Important Information - The company repurchased 117,000 shares at an average price of $30.95 per share during the quarter [37]. - A 9% increase in the annual dividend was authorized, raising it from$ 0.44 to $0.48 per share [38]. Q&A Session Summary Question: Can you provide more detail on the breadth of what you're working on regarding Gen AI? - Management noted that client engagements are increasingly focused on Gen AI, driving meeting counts and revenue opportunities [59]. Question: How has the news about DeepSeek affected your pipeline? - Management indicated that the advancements in foundational large language models are positive for Gen AI solutions, enhancing their competitive edge [64]. Question: Is the recent SAP business performance sustainable? - Management expressed that while Q4 performance was strong, it may not be sustainable into Q1, but they expect strong demand throughout 2025 [68]. Question: Are you seeing meetings convert into implementation contracts? - Management reported increasing activity and visibility on pipeline conversion, with clients planning budgeted initiatives for 2025 [77]. Question: Can you quantify the headwind from eProcurement and OneStream in Q4? - Management acknowledged that these areas were significant enough to impact reported growth, but specific quantification was not provided [92].