Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Hackett Group Inc (HCKT, Financial) reported revenues before reimbursements of $76.2 million and adjusted earnings per share of $0.41, both near the high end of their quarterly guidance.
- The company's GSBT segment experienced strong revenue growth, driven by GenAI engagements, which also positively impacted gross margins.
- The GenAI platform's capabilities, including AI Explorer version 3 and ZBrain, are highly differentiated, allowing The Hackett Group Inc (HCKT) to compete strongly in the rapidly growing AI space.
- The company is seeing increased client engagement and interest in GenAI solutions, with clients moving from awareness to budgeted projects.
- The Hackett Group Inc (HCKT) is leveraging its AI capabilities to enhance its executive advisory and IP-based programs, integrating GenAI content to meet client demand.
Negative Points
- The company experienced weaknesses in its one stream and e-procurement practices, partially offsetting the growth in the GSBT segment.
- Revenues from the Oracle solution segment decreased by 3% compared to the prior year, impacted by the wind down of a large engagement.
- The SAP solution segment saw an 8% revenue decrease compared to the prior year, although future demand is expected to be strong.
- The company's cash balances decreased to $9.2 million at the end of the first quarter, down from $16.4 million in the previous quarter.
- The increase in days sales outstanding (DSO) to 73 days from 66 days in the previous quarter indicates potential challenges in cash collection.
Q & A Highlights
Q: Can you elaborate on client interactions with AI Explorer and the pipeline for implementation projects? How do you expect this to progress throughout the year?
A: Ted Fernandez, Chairman and CEO, explained that client interactions have been very favorable, with clients appreciating the unique capabilities of AI Explorer. The ability to evaluate automation opportunities and provide ROI assessments at a use case level is highly valued. The company is considering partnerships with larger channel partners to expand opportunities and reach more technology buyers.
Q: How do you feel about your current capacity for AI implementation, and what are your plans for scaling in 2025 and 2026?
A: Ted Fernandez noted that the company has increased its implementation capacity by about 60-70% since the acquisition of Leeway Hertz. They are expanding both offshore and in the US to support new engagement opportunities.
Q: Can you provide an update on the joint venture with ZBrain? Are you signing ARR contracts?
A: Ted Fernandez stated that they are adding licensed clients to the ZBrain platform and are close to completing the joint venture agreement, expected within the next 30 to 45 days.
Q: How does the current environment of economic disruption and change benefit or challenge your business?
A: Ted Fernandez mentioned that while economic disruptions like tariffs were not anticipated, the company is focusing on strategic cost reduction and efficiency improvements. The interest in GenAI capabilities remains high, and they are engaging with clients and channel partners actively.
Q: What portion of AI revenue was implementation revenue in the quarter, and how should that change going forward?
A: Ted Fernandez estimated that the revenue split was about 50/50 between implementation and other services. As the business grows, the implementation revenue is expected to become significantly greater.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
