Q4 2025 Hackett Group Inc Earnings Call

February 17, 2026

Operator: Please continue to stand by. The conference will begin momentarily. Again, please continue to stand by, and thank you for your patience. Again, please continue to stand by. The conference will begin shortly. Thank you. Welcome to The Hackett Group Fourth Quarter Earnings Conference Call. Your lines have been placed on a listen-only mode until the question and answer session. Please be advised the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO, and Mr. Rob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin, sir.

Speaker #2: We'll begin shortly. Thank you. Welcome to the Hackett Group Q4 earnings conference call. Your lines have been placed on a listen-only mode until the question-and-answer session.

Speaker #2: Please be advised the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO, and Mr. Rob Ramirez, Chief Financial Officer.

Speaker #2: Mr. Ramirez, you may begin, sir. Good afternoon, everyone, and thank you for joining us to discuss the Hackett Group's Q4 results. Speaking on the call today, I'm here to answer your questions.

Rob Ramirez: Good afternoon, everyone, and thank you for joining us to discuss the Hackett Group's Q4 results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of the Hackett Group, and myself, Rob Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4:08 PM Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data that's discussed on this call that is not contained in the release on the investor relations page of our website. Before we begin, I would like to remind you that in 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.

Speaker #2: Our Ted Fernandez, Chairman and CEO of The Hackett Group, and myself, Rob Ramirez, Chief Financial Officer. A press announcement was released over the wires at 4:08 p.m. Eastern Time.

Speaker #2: For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data that's discussed on this call that is not contained in the release on the investor relations page of our website.

Speaker #2: Before we begin, I would like to remind you that in 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.

Speaker #2: These statements relate to our current expectations estimates and projections and are not a guarantee of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict and which may not be accurate.

Rob Ramirez: These statements relate to our current expectations, estimates, and projections and are not a guarantee of future performance. They involve risks, uncertainties, and are sometimes considered 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, that are contained in our SEC filings. At this point, I would like to turn it over to Ted.

Speaker #2: Actual results may vary. These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors, that are contained in our SEC filings.

Speaker #2: At this point, I would like to turn it over to Ted.

Speaker #3: Thank you, Rob, and welcome, everyone, to our Q4 earnings call. As we normally do, I will open up the call by providing overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow, and guidance.

Ted Fernandez: Thank you, Rob, and welcome everyone to our Q4 earnings call. As we normally do, I will open up the call by providing overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow, and guidance. We will then review our market and strategy-related comments, after which we will open it up to Q&A. This afternoon, we reported revenues before reimbursements of $74.8 million and adjusted earnings per share of $0.40, which were above and at the high of our quarterly guidance, respectively.... While we cannot control the short-term market sentiment or demand volatility, we can control the value, the intrinsic value we create. Over the past 2 years, we have been systematically expanding our suite of GenAI-enabled platforms to lead in the rapidly emerging Agentic Enterprise era.

Speaker #3: We will then review our market and strategy-related comments, after which we will open it up to Q&A. This afternoon, we reported revenues before reimbursements of $74.8 million and adjusted earnings per share of $0.40, which were above and at the high end of our quarterly guidance, respectively.

Speaker #3: While we cannot control short-term market sentiment or demand volatility, we can control the intrinsic value we create. Over the past two years, we have been systematically expanding our suite of GenAI-enabled platforms to lead in the rapidly emerging agentic enterprise era.

Speaker #3: By embedding our IP into our new platforms and models, we believe we will be able to generate new revenue with higher margins in entirely new ways that allow us to deliver breakthrough value to clients.

Ted Fernandez: By embedding our IP into our new platforms and models, we believe we will be able to generate new revenue with higher margins in entirely new ways that allow us to deliver breakthrough value to clients. Our quarterly results continue to reflect the market and our own disruptive effects, given our aggressive AI transition. Our strategy has been to develop highly differentiated GenAI-enabled capability that leverages our unique expertise as well as our proprietary IP. The goal was to be able to accelerate and, more importantly, enhance the value of solutions we deliver to clients. Our AI leadership and relevance is being defined by our distinct capabilities to help clients identify, evaluate, design, and deploy high-impact AI solutions utilizing our AI Explorer, or XPLR, platform. We are not surprised by the changes required by the AI transition. We were early adopters and anticipated the required changes.

Speaker #3: Our quarterly results continue to reflect the market and our own disruptive effects, given our aggressive AI transition. Our strategy has been to develop highly differentiated GenAI-enabled capability that leverages unique expertise as well as our proprietary IP.

Speaker #3: The goal was to be able to accelerate and, more importantly, enhance the value of solutions we deliver to clients. Our AI leadership and relevance is being defined by our distinct capabilities to help clients identify, evaluate, design, and deploy high-impact AI solutions utilizing our AI Explorer or XPLR platform.

Speaker #3: We are not surprised by the changes required by the AI transition. We were early adopters and anticipated the required changes. We started in January of 2024 when we first introduced AI Explorer's version 1, and in September of 2024 when we acquired the globally recognized GenAI engineering capabilities of LeewayHertz to expand our agentic design and build capabilities, and also enhance our platform innovation as well as licensing efforts.

Ted Fernandez: We started in January 2024, when we first introduced AI Explorer's Version 1, and in September 2024, when we acquired the globally recognized GenAI engineering capabilities of LeewayHertz to expand our agentic design and build capabilities and also enhance our platform, platform innovation as well as licensing efforts. Our AI Explorer Version 5 release is now licensable. AI Explorer is distinct due to its enterprise-wide solution simulation, ideation, and detailed process and agentic design capabilities, which are supported by solution-specific ROI. AI Explorer is uniquely ours because it is powered by our proprietary Hackett solution language model and informed by our globally recognized Hackett process benchmarks and best practices process intelligence IP.

Speaker #3: Our AI Explorer version 5 release is now licensable. AI Explorer is distinct due to its enterprise-wide solution simulation ideation and detailed process and agentic design capabilities which are supported by solution-specific ROI.

Speaker #3: AI Explorer is uniquely ours because it is powered by our proprietary Hackett Solution Language Model and informed by our globally recognized Hackett process benchmarks and best practices process intelligence IP.

Speaker #3: Although we started with AI Explorer, we have now introduced new platforms which include XT to support our business transformation engagements, and AIX to support our enterprise application implementation engagements.

Ted Fernandez: Although we started with AI Explorer, we have now introduced new platforms, which include XT, to support our business transformation engagements, and AIX to support our enterprise application implementation engagements, and Ask Hackett, which we rolled out last summer, to support the delivery of our executive applied intelligence programs. As we recently announced, we now have a complete suite of GenAI-enabled platforms to support nearly all of our services. We believe we have been innovative leaders in our industry. As I mentioned, these platforms significantly accelerate and enhance the value of our services and should allow us to grow our revenues and realize meaningful margin increases as we move from labor-based delivery to labor-led services, supported by our powerful GenAI delivery platforms and globally recognized IP.

Speaker #3: And as Hackett, which we rolled out last summer to support the delivery of our executive Applied Intelligence programs. As we recently announced, we now have a complete suite of GenAI-enabled platforms to support nearly all of our services.

Speaker #3: We believe we have been innovative leaders in our industry. As I mentioned, these platforms significantly accelerate and enhance the value of our services and should allow us to grow our revenues and realize meaningful margin increases as we move from labor-based delivery to labor-led services supported by our powerful GenAI delivery platforms and globally recognized IP.

Speaker #3: Our job is to make sure our clients understand the importance of their business process context and the critical role it plays in the successful adoption of AI.

Ted Fernandez: Our job is to make sure our clients understand the importance of their business process context and the critical role it plays in the successful adoption of AI. There is little to no value realization without a detailed understanding of a client's specific business process and reimagining those specific client requirements by assessing the AI enablement opportunity of each work step. That is the critical foundational element of AI Explorer. We believe that our platform-enabled delivery strategy will provide significant new revenue growth opportunities with higher margins, while helping clients capture this unprecedented transformative opportunity. We also believe that channel partners can help us accelerate our efforts by increasing client access, which should also result in revenue growth.

Speaker #3: There is little to no value realization without a detailed understanding of a client's specific business process and reimagining those specific client requirements by assessing the AI enablement opportunity of each work step.

Speaker #3: That is the critical foundational element of AI Explorer. We believe that our platform-enabled delivery strategy will provide significant new revenue growth opportunities with higher margins, while helping clients capture this unprecedented transformative opportunity.

Speaker #3: We also believe that channel partners can help us accelerate our efforts by increasing client access, which should also result in revenue growth. We have spent nearly six months with a global technology and consulting company demonstrating and testing AI Explorer's powerful capabilities on global highly complex client solutions that have resulted in our platform being described as game-changing.

Ted Fernandez: We have spent nearly six months with a global technology and consulting company demonstrating and testing AI Explorer's powerful capabilities on global, highly complex client solutions that have resulted in our platform being described as game-changing. We expect to execute and launch a global go-to-market collaboration agreement that will allow us to jointly serve new and existing clients. We expect to finalize our agreement and launch our first client shortly. We also continue to believe that we can bring significant value to all organizations that utilize Celonis' software and other process mining software. Our ability to ingest their valuable volume and process execution detail into AI Explorer allows us to accelerate and better inform our ideation and solutioning recommendations, which allows customers to accelerate their transformation initiatives. We also plan to launch a go-to-market pilot initiative with ServiceNow this month.

Speaker #3: We expect to execute and launch a go-to-market, a global go-to-market collaboration agreement that will allow us to jointly serve new and existing clients. We expect to finalize our agreement and launch our first client shortly.

Speaker #3: We also continue to believe that we can bring significant value to all organizations that utilize Celonis software, and other process mining software. Our ability to ingest their valuable volume and process execution detail into AI Explorer allows us to accelerate and better inform our ideation and solutioning recommendations, which allows customers to accelerate their transformation initiatives.

Speaker #3: We also plan to launch a go-to-market pilot initiative with ServiceNow this month. We have been pursuing this opportunity for several months and are eager to see the outcome from our joint pursuits.

Ted Fernandez: We have been pursuing this opportunity for several months and are eager to see the outcome from our joint pursuits. On the balance sheet side, we continue to generate strong cash flow from operations, which has allowed us to maintain our dividend and continue our strong buyback program. 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 conditions following Rob's comments. Rob?

Speaker #3: On the balance sheet side, we continue to generate strong cash flow from operation, which has allowed us to maintain our dividend and continue our strong buyback program.

Speaker #3: 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 conditions following Rob's comments.

Speaker #3: Rob, thank you, Ted. As I typically do, I'll cover the following topics during this portion of the call. I'll cover an overview of the fourth quarter results for 2020-25, along with an overview of related key operating statistics.

Rob Ramirez: Thank you, Ted. As I typically do, I'll cover the following topics during this portion of the call. I'll cover an overview of the Q4 results for 2025, along with an overview of related key operating statistics, an overview of our cash activities during the quarter, and I'll then conclude with a discussion on our financial outlook for Q1 of 2026. For the purposes of this call, I will comment separately regarding the revenues of our global SMBT 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 GenAI consulting and implementation licensing revenues, benchmarking and business transformation offerings, executive applied intelligence advisory programs, and our OneStream and eProcurement implementation offerings. Our Oracle Solutions and our SAP Solutions segments include results of our Oracle and SAP offerings, respectively.

Speaker #3: An overview of our cash flow activities during the quarter, and I'll then conclude with a discussion on our financial outlook for the first quarter of 2026.

Speaker #3: For the purposes of this call, I will comment separately regarding the revenues of our global S&BT segment, our Oracle solution segment, our SAP solution segment, and the total company.

Speaker #3: Our global S&BT segment includes the results of our North America and international GenAI consulting and implementation licensing revenues, benchmarking and business transformation offerings, executive applied intelligence advisory programs, and our OneStream and eProcurement implementation offerings.

Speaker #3: Our Oracle solutions and our SAP solution segments include results of our Oracle and SAP offerings, respectively. Please note that we will be referencing both total revenues and revenue before reimbursements in our discussion.

Rob Ramirez: Please note that we will be referencing both total revenues and revenue before reimbursements in our discussion. Reimbursable expenses are primarily project travel-related expenses passed through to our clients that 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. Specifically, all references to adjusted financial measures will exclude reimbursable expenses, non-cash stock-based compensation expense, all acquisition-related cash and non-cash expenses, amortization of intangible assets, and other non-recurring items, and AI transition charges relating to headcount reductions. We have included reconciliations of GAAP to non-GAAP financial measures in our press release filed earlier today, and we'll post any additional information based on the discussions from this call on the investor relations page of our company's website.

Speaker #3: Reimbursable expenses are primarily project travel-related expenses passed through to our clients that 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.

Speaker #3: Specifically, I'll reference this to adjusted financial measures, which will exclude reimbursable expenses, non-cash stock-based compensation expense, all acquisition-related cash and non-cash expenses, amortization of intangible assets, and other non-recurring items, as well as AI transition charges relating to headcount reductions.

Speaker #3: 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 on the investor relations page of our company's website.

Speaker #3: For the fourth quarter of 2025, our total revenues before reimbursements were $74.8 million, which exceeded the high end of our guidance. The fourth quarter reimbursable expense ratio on revenues before reimbursements was 1.2% as compared to 1.3% in the prior quarter, and 2.3% when compared to the same period in the prior year.

Rob Ramirez: For Q4 2025, our total revenues before reimbursements were $74.8 million, which exceeded the high end of our guidance. The Q4 reimbursable expense ratio on revenues before reimbursements was 1.2%, as compared to 1.3% in the prior quarter, and 2.3% when compared to the same period in the prior year. Total revenues before reimbursements from our global SMBT segment were $38.6 million for Q4 2025, a decrease of 11% when compared to the same period in the prior year. As Ted mentioned, the market is moving to AI-enabled services. AI is becoming an increasing percentage of all of our client engagements as the convergence of traditional and new AI-oriented services is occurring at an accelerated rate.

Speaker #3: Total revenues before reimbursements from our global S&BT segment were $38.6 million for the fourth quarter of 2025, a decrease of 11% when compared to the same period in the prior year.

Speaker #3: As Ted mentioned, the market is moving to AI-enabled services. AI is becoming an increasing percentage of all of our client engagements, as the convergence of traditional and new AI-oriented services is occurring at an accelerated rate.

Speaker #3: Given our expended platform delivery capabilities, we can accelerate value realization and realize productivity improvements utilizing our XT and AI Explorer platforms. We expect Q1 revenue to be subsequently and gross margin to be up on a year-over-year basis and both to continue to increase throughout the year.

Rob Ramirez: Given our expanded platform delivery capabilities, we can accelerate value realization and realize productivity improvements utilizing our XT and AI Explorer platforms. We expect Q1 revenue to be sequentially and gross margin to be up on a year-over-year basis, and both to continue to increase throughout the year. Total revenues before reimbursements from our Oracle Solutions segment were $14 million for the fourth quarter of 2025, a decrease of 20% when compared to the same period in the prior year. With the recent introduction of our AIX platform, which supports the delivery of our Oracle implementation engagements, we have started to realize delivery productivity improvements. Correspondingly, we expect both revenue and gross margin improvement in Q1 on a sequential basis, and we expect those improvements to continue to increase throughout the year.

Speaker #3: Total revenues before reimbursements from our Oracle solution segment were $14 million for the fourth quarter of 2025, a decrease of 20% when compared to the same period in the prior year.

Speaker #3: With the recent introduction of our AIX platform, which supports the delivery of our Oracle implementation engagements, we have started to realize delivery productivity improvements.

Speaker #3: Correspondingly, we expect both revenue and gross margin improvement in Q1 on a sequential basis, and we expect those improvements to continue to increase throughout the year.

Speaker #3: Total revenues before reimbursements from our SAP solution segment were $22.2 million for the fourth quarter of 2025, an increase of 32% when compared to the same period in the prior year.

Rob Ramirez: Total revenues before reimbursements from our SAP Solutions segment were $22.2 million for Q4 2025, an increase of 32% when compared to the same period in the prior year. This was primarily driven by strong software-related sales in the quarter, resulting from the increased sales investments we have made and the SAP success driving S/4HANA Cloud migrations. The strong software sales were coupled with significant implementation fees, and therefore we expect demand for our SAP services to be strong throughout the year. Approximately 22% of our total company revenues before reimbursements consist of recurring, multi-year, and subscription-based revenues, which include our executive advisory, application managed services, and GenAI license contracts. We are seeing the natural migration of IPASS requests to transition to the Hackett Intelligence IP capabilities embedded in Ask Hackett, AI Explorer, and ZBrain-related recurring revenue opportunities.

Speaker #3: This was primarily driven by strong software-related sales in the quarter, resulting from the increased sales investments we have made and SAP's success driving S/4HANA cloud migrations.

Speaker #3: The strong software sales were coupled with significant implementation fees and therefore we expect demand for our SAP services to be strong throughout the year.

Speaker #3: Approximately 22% of our total company revenues before reimbursements consist of recurring multi-year and subscription-based revenues, which include our executive advisory, application management services, and GenAI licensed contracts.

Speaker #3: We are seeing the natural migration of iPaaS requests to transition to the Hackett Intelligence IP capabilities embedded in Ask Hackett AI Explorer and ZBring-related recurring revenue opportunities.

Speaker #3: Total company adjusted cost of sales totaled $40 million, or $53.4% of revenues before reimbursements, in the fourth quarter of 2025 as compared to $40.5 million or $52.3% of revenues before reimbursements in the prior year.

Rob Ramirez: Total company adjusted cost of sales totaled $40 million, or 53.4% of revenues before reimbursements in Q4 2025, as compared to $40.5 million, or 52.3% of revenues before reimbursements in the prior year. Total company consultant headcount was 1,301 at the end of Q4, as compared to total company consultant headcount of 1,317 in the previous quarter and 1,284 at the end of Q4 2024. Total company adjusted gross margin on revenues before reimbursements was 46.6% in Q4 2025, as compared to 47.7% in the prior year. Adjusted SG&A was $20 million, or 26.7% of revenues before reimbursements in Q4 2025.

Speaker #3: Total company consultant headcount was $1,301 at the end of the fourth quarter as compared to total company consultant headcount of $1,317 in the previous quarter and $1,284 at the end of the fourth quarter of 2024.

Speaker #3: Total company adjusted gross margin on revenues before reimbursements was $46.6% in the fourth quarter of 2025 as compared to $47.7% in the prior year.

Speaker #3: Adjusted SG&A was $20 million, or $20.67% of revenues before reimbursements in the fourth quarter of 2025. This is compared to $18.4 million or $23.7% of revenues before reimbursements in the prior year.

Rob Ramirez: This is compared to $18.4 million, or 23.7% of revenues before reimbursements in the prior year. The year-over-year increase is primarily due to incremental commissions from increased license sales in the ASAP SAP segment. Adjusted EBITDA was $15.9 million, or 21.3% of revenues before reimbursements in Q4 2025, as compared to $19.5 million, or 25.2% of revenues before reimbursements in the prior year. GAAP net income for Q4 2025 totaled $5.6 million, or diluted earnings per share of $0.21, as compared to GAAP net income of $3.6 million, or diluted earnings per share of $0.12 in Q4 of the previous year.

Speaker #3: The year-over-year increase is primarily due to incremental commissions from increased licensed sales in the SAP segment. Adjusted EBITDA was $15.9 million, or 21.3% of revenues before reimbursements in the fourth quarter of 2025, as compared to $19.5 million, or 25.2% of revenues before reimbursements in the prior year.

Speaker #3: GAAP net income for the fourth quarter of 2025 totaled $5.6 million, or diluted earnings per share of $0.21, as compared to GAAP net income of $3.6 million, or diluted earnings per share of $0.12, in the fourth quarter of the previous year.

Speaker #3: Fourth quarter 2025 GAAP net income includes non-cash stock compensation expense from our stock price reward program of $1.8 million, or $0.08 per diluted share, and acquisition-related cash and non-cash compensation expense of $1.1 million, or $0.04 per diluted share.

Rob Ramirez: Q4 2025 GAAP net income includes non-cash stock compensation expense from our stock price award program of $1.8 million, or $0.08 per diluted share, and acquisition-related cash and non-cash compensation expense of $1.1 million, or $0.04 per diluted share. 2024 GAAP net income includes non-cash stock compensation expense from our stock price award program of $5.1 million and acquisition-related cash and non-cash compensation and related expenses of $2.3 million, which in total impacted our Q4 2024 GAAP results by $0.23. Acquisition-related cash and non-cash stock compensation items related to purchase consideration for the LeewayHertz acquisition. This consideration paid to the sellers contained certain vesting requirements, and as such, is reflected as compensation expense under GAAP rather than purchase consideration.

Speaker #3: 2024 GAAP net income includes non-cash stock compensation expense from our stock price reward program of $5.1 million, and acquisition-related cash and non-cash compensation and related expenses of $2.3 million, which in total impacted our Q4 2024 GAAP results by 23 cents.

Speaker #3: Acquisition-related cash and non-cash stock compensation items relate to purchase consideration for the Lee Warhurst acquisition. This consideration paid to the sellers contains service testing requirements and, as such, is reflected as compensation expense under GAAP rather than purchase consideration.

Speaker #3: Adjusted net income and diluted earnings per share for the fourth quarter of 2025 totaled $10.9 million, or adjusted diluted net income per common share of $0.40, which is at the high end of our earnings guidance range and compares to prior-year adjusted diluted net income per share of $0.47.

Rob Ramirez: Adjusted net income and diluted earnings per share for Q4 2025 totaled $10.9 million, or adjusted diluted net income per common share of $0.40, which is at the high end of our earnings guidance range and compares to prior year adjusted diluted net income per share of $0.47. The company's cash balances were $18.2 million at the end of Q4 2025, as compared to $13.9 million at the end of the previous quarter. Net cash provided from operating activities in the quarter was $19.1 million, primarily driven by net income adjusted for non-cash activity and increases in accounts payable and accrued expenses, partially offset by an increase in accounts receivable.

Speaker #3: The company's cash balances, where $18.2 million at the end of the fourth quarter of 2025 as compared to $13.9 million at the end of the previous quarter.

Speaker #3: Net cash provided from operating activities in the quarter was $19.1 million, primarily driven by net income adjusted for non-cash activity and increases in accounts payable and accrued expenses partially offset by an increase in accounts receivable.

Speaker #3: DSO, or days sales outstanding, was 71 days at the end of the fourth quarter, as well as in the previous quarter, and 66 days in the prior year.

Rob Ramirez: Our DSO, or day sales outstanding, was 71 days at the end of Q4, as well as in the previous quarter, and 66 days in the prior year. As Ted mentioned, we were pleased that during Q4 2025, we were able to utilize our strong balance sheet and cash flow to return capital to our shareholders. By leveraging our credit facility, we completed our stock tender offer, which resulted in the repurchase of 2 million shares of the company's stock at a price of $20.29 per share, including transaction-related fees. In total, including purchases from employees to satisfy income tax withholding triggered by the vesting of restricted shares, the company acquired 2.1 million of the company's stock at an average of $20.30 per share, for a total cost of approximately $42 million.

Speaker #3: As Ted mentioned, we were pleased that during the fourth quarter of 2025, we were able to utilize our strong balance sheet and cash flow to return capital to our shareholders.

Speaker #3: By leveraging our credit facility, we completed our stock tender offer which resulted in the repurchase of $2 million shares of the company stock at a price of $20.29 per share including transaction-related fees.

Speaker #3: In total, including purchases from employees to satisfy income tax withholding triggered by the vesting of restricted shares, the company acquired 2.1 million shares of company stock at an average of $20.30 per share, for a total cost of approximately $42 million.

Speaker #3: Our remaining stock repurchase authorization at the end of the quarter was $11.4 million. At its most recent meeting, subsequent to quarter end, the company's board of directors authorized a $13.6 million increase in the company's share repurchase authorization bringing it to a total of $25 million.

Rob Ramirez: Our remaining stock repurchase authorization at the end of the quarter was $11.4 million. At its most recent meeting, subsequent to quarter end, the company's board of directors authorized a $13.6 million increase in the company's share repurchase authorization, bringing it to a total of $25 million. Additionally, the board declared the first quarter dividend of $0.12 per share for its shareholders of record on 20 March 2026, to be paid on 3 April 2026. During the quarter, the company borrowed a net of $32 million from its credit facility to fund the tender offer. The balance of the company's outstanding debt at the end of the fourth quarter was $76 million.

Speaker #3: Additionally, the board declared the first quarter dividend of $0.12 per share for its shareholders of record on March 20, 2026, to be paid on April 3, 2026.

Speaker #3: During the quarter, the company borrowed a net of $32 million from its credit facility to fund the tender offer. The balance of the company's outstanding debt at the end of the fourth quarter was $76 million.

Speaker #3: Before I move to guidance for the first quarter of 2026, I would like to remind everyone of the seasonality of our business relative to costs as we move sequentially from Q4 to Q1.

Rob Ramirez: Before I move to guidance for the first quarter of 2026, I would like to remind everyone of the seasonality of our business relative to costs as we move sequentially from Q4 to Q1. Specifically, consistent with first quarter guidance provided in previous years, our first quarter guidance for 2026 will reflect the sequential increase in US payroll-related taxes and the sequential buildup of our vacation accruals. The company estimates total revenues before reimbursements for the first quarter of 2026 to be in the range of $70.5 million to $72 million. We expect both Global SMBT and Oracle Solutions segments to be down when compared to the prior year, but sequentially up from Q4. We expect SAP Solutions segment revenue before reimbursements to continue to be up on a year-over-year basis.

Speaker #3: Specifically, consistent with first quarter guidance provided in previous years, our first quarter guidance for 2026 will reflect the sequential increase in US payroll-related taxes and the sequential buildup of our vacation accruals.

Speaker #3: The company estimates total revenues before reimbursements for the first quarter of 2026 to be in the range of $70.5 million to $72 million. We expect both global SMBT and Oracle Solutions segments to be down when compared to the prior year but sequentially up from Q4.

Speaker #3: We expect SMBT Solutions segment revenue before reimbursements to continue to be up on a year-over-year basis. As a result of the continuing pivot of our business to generative AI, the company will incur AI transition charges in the first quarter of approximately $1 to $1.5 million.

Rob Ramirez: As a result of the continuing pivot of our business to generative AI, the company will incur AI transition charges in Q1 of approximately $1 to 1.5 million. These charges will primarily relate to severance costs due to headcount reductions in the leverage of our AI delivery platforms. The company may continue to incur additional charges during 2026. These charges will be excluded from adjusted results. We estimate adjusted diluted net income per common share in Q1 of 2026 to be in the range of 34 to 36 cents, which assumes a GAAP effective tax rate on adjusted earnings of 26.3%, as compared to GAAP effective tax rate of 20.1% in Q1 of the prior year.... an unfavorable increase in taxes of approximately 4 cents per diluted share.

Speaker #3: These charges will primarily relate to severance costs due to headcount reductions from the leverage of our AI delivery platforms. The company may continue to incur additional charges during 2026.

Speaker #3: These charges will be excluded from adjusted results. We estimate adjusted diluted net income for common share in the first quarter of 2026 to be in the range of $34 to $36.

Speaker #3: Which assumes a GAAP effective tax rate on adjusted earnings of $26.3% as compared to GAAP effective tax rate of $20.1% in the first quarter of the prior year in unfavorable increase in taxes of approximately $0.04 per diluted share.

Speaker #3: We expect the adjusted gross margin as a percentage of revenues before reimbursements to be approximately 44% to 45%. We expect adjusted SG&A and interest expense for the first quarter to be approximately $20 million.

Rob Ramirez: We expect the adjusted gross margin, as a percentage of revenues before reimbursements, to be approximately 44% to 45%. We expect adjusted SG&A and interest expense for Q1 to be approximately $20 million. We expect Q1 adjusted EBITDA, as a percentage of revenues before reimbursements, to be in the range of approximately 19.5% to 20.5%. Lastly, we expect cash balances, excluding the impact of share buyback activity, to be tempered through the payment of 2025 performance-related bonuses and the payment of employee income tax withholding, triggered by the net vesting of restricted shares. At this point, I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months.

Speaker #3: We expect first quarter adjusted EBITDA as a percentage of revenues before reimbursements to be in the range of approximately $19.5 to $20.5%. Lastly, we expect cash balances excluding the impact of share buyback activity to be tempered due to the payment of 2025 performance-related bonuses and the payment of employee income tax withholding triggered by the net vesting of restricted shares.

Speaker #3: At this point, I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months.

Speaker #1: 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.

Ted Fernandez: 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 solid in traditional areas, it continues to be impacted by thoughtful decision making as organizations assess competing priorities, partly due to economic concerns and also partly due to the consideration and also confusion of emerging GenAI technologies and what they offer. We have not been surprised by the powerful potential to the compute and inference power of the large language models to drive transformative change. But rather, the confusion created by the frequent introductions of new technology, primarily build capabilities, is where we believe the confusion lies. What requires greater understanding is what is necessary to realize high returns from the deployment of the available emerging capabilities.

Speaker #1: Although demand for digital transformation remains solid in traditional areas, it continues to be impacted by thoughtful decision-making as organizations assess competing priorities—partly due to economic concerns, and also partly due to the consideration and confusion around emerging GenAI technologies and what they offer.

Speaker #1: We have not been surprised by the powerful potential of the compute and inference power of the large language models to drive transformative change. But rather, the confusion created by the frequent introductions of new, technology-primarily built capabilities is where we believe the confusion lies.

Speaker #1: What requires greater understanding is what is necessary to realize high returns from the deployment of the available emerging capabilities. To assess and design high ROI solutions requires client-specific process knowledge in order to reimagine and enhance the new workflows, to determine agentic workflows which should be designed and deployed, and which can provide targeted returns.

Ted Fernandez: To assess and design high ROI solutions requires client-specific process knowledge in order to reimagine and enhance the new workflows, to determine agentic workflows, which should be designed and deployed, which can provide targeted returns. That is where our process knowledge, expertise, benchmarks, and the powerful capability of our Hackett Solution Language Model, which powers all our platforms, are distinct. The rapidly emerging build capabilities, which are being introduced by the leading providers like Anthropic and OpenAI, are only accelerating and reducing the cost to build agents and agentic workflows. However, they do not eliminate the need to fully understand the exact client-specific business process requirements, its, the client's existing automation footprint, and the need to assess existing and potential data sources necessary to fully optimize the value of AI in the design, build, and deployment of solutions.

Speaker #1: That is where our process knowledge expertise benchmarks and the powerful capability of our Hackett Solution language model which powers all our platforms are distinct.

Speaker #1: The rapidly emerging build capabilities which are being introduced by the client providers like Anthropic and OpenAI are only accelerating and reducing the cost to build agents and agentic workflows.

Speaker #1: However, they do not eliminate the need to fully understand the exact client-specific business process requirements; it's the client's existing automation footprint and the need to assess existing and potential data sources necessary to fully optimize the value of AI in the design, build, and deployment of solutions.

Speaker #1: This is without even considering what it takes to fully then execute a highly impactful, high-productivity solution, which impacts both the number of people that support that activity as well as the new cognitive capabilities that are going to be utilized, and how.

Ted Fernandez: This is without even considering what it takes to fully then execute a highly... high impact, high productivity solution, which impacts both the number of people that support that activity, as well as the new cognitive capabilities that are gonna be utilized, and how. We believe we are entering the greatest automation expansion area of our lifetime, which will dramatically increase the enterprise automation footprint of every organization. The opportunity of all technology players to provide the underlying application and infrastructure solutions is obviously massive, and therefore, their marketing is understandable. But no one should underestimate the incumbent enterprise application provider's ability to thrive in this hyper-growth automation environment. Based on our estimates, the automation expansion opportunity is somewhere between 3 to 5 times the existing automation footprint, which exists today.

Speaker #1: We believe we are entering the greatest automation expansion era of our lifetime, which will dramatically increase the enterprise automation footprint of every organization. The opportunity for all technology players to provide the underlying application and infrastructure solutions is obviously massive, and therefore, their marketing is understandable.

Speaker #1: But no one should underestimate the incumbent enterprise application providers' ability to thrive in this hyper-growth automation environment. Based on our estimates, the automation expansion opportunity is somewhere between 3 to 5 times the existing automation footprint which exists today.

Speaker #1: Imagine all of the change that was to happen if you really were transitioning an organization from what is primarily static and rule-based automation to fully cognitive automation, which allows for the deployment of digital labor.

Ted Fernandez: Imagine all of the change that was to happen if you really were transitioning an organization from what is primarily static and rule-based automation to fully cognitive automation, which allows for the deployment of digital labor. Again, do not underestimate the opportunity for software and services companies to be able to grow in this environment, given the significant amount of automation which will and can be deployed, and the help they will need to effect those changes. One of the critical questions that AI Explorer answers is, what automation is required by a proposed AI solution which already exists in the client's enterprise application footprint? Clients have no desire to duplicate any automation they have worked so hard to deploy. So is the transition as disruptive as software and services companies, and as the current stock market volatility of that sector suggests?

Speaker #1: Again, do not underestimate the opportunity for software and services companies to be able to grow in this environment, given the significant amount of automation which will and can be deployed, and the help they will need to effect those changes.

Speaker #1: One of the critical questions that AI Explorer answers is what automation is required by a proposed AI solution which already exists in the client's enterprise application footprint.

Speaker #1: Clients have no desire to duplicate any automation they have worked so hard to deploy. So is the transition as disruptive as software and services companies, and as the current stock market volatility of that sector, suggest?

Speaker #1: The answer is yes. Yes, but again, at the same time, what has not been equally or properly reported is the total addressable market increase for enterprise automation which that will be delivered when and as existing automation footprints extend into a cognitive and agentic workflows.

Ted Fernandez: The answer is yes, yes. But again, at the same time, what has not been equally or properly reported is the total addressable market increase for enterprise automation, which will be delivered when and as existing automation footprints extend into the cognitive and agentic workflows, and therefore, who will provide it. Increasing automation opportunities should more than offset any disruption that software and services providers experience, if they expand their current application footprint and related services capability to capture the significant growth. All organizations, all organizations will need to understand the potential productivity and intelligence force multiplier that will emerge when existing static rule-based automation starts to transition to cognitive and automation. We expect IT budgets to increase with increasing attention and allocations to the rapidly emerging GenAI solutions and the related opportunities and threats that it brings.

Speaker #1: And therefore, who will provide it? Increasing automation opportunities should more than offset any disruption that software and services provider experience if they expand their current application footprint and related services capability to capture the significant growth.

Speaker #1: All organizations will need to understand the potential productivity and intelligence force multiplier that will emerge when existing static, rule-based automation starts to transition to cognitive and automation.

Speaker #1: We expect IT budgets to increase with increasing attention and allocations to the rapidly emerging GenAI solutions. And the related opportunities and threats that it brings.

Speaker #1: Eliminating confusion, as I say, will only be key to accelerating the adoption. The unlimited potential of GenAI will define an entirely new level of AI world-class performance standards.

Ted Fernandez: Eliminating confusion, as I say, will be key to accelerating the adoption. The unlimited potential of Gen AI will define an entirely new level of AI world-class performance standards, driving all software and services providers to extend the value of their existing offerings with the introduction of agentic AI capability. We believe this will result in unprecedented innovations, which all organizations will have to consider. The shift is consistent with our aggressive pivot to Gen AI-enabled transformation, which we believe creates a unique value creation opportunity for our organizations. We believe that the platforms that we have deployed and the unique opportunities and the unique capabilities of AIX have already significantly expanded our opportunity to help clients address areas and opportunities that we were not previously pursuing.

Speaker #1: Driving all software and services providers to extend the value of their existing offerings with the introduction of agentic AI capability. We believe this will result in unprecedented innovations which all organizations will have to consider.

Speaker #1: The shift is consistent with our aggressive pivot to GenAI-enabled transformation, which we believe creates a unique value creation opportunity for our organizations. We believe that the platforms we have deployed and the unique capabilities of AI Explorer have already significantly expanded our opportunity to help clients address areas and opportunities that we were not previously pursuing.

Speaker #1: Another critical investment that we have made is to also build our own GenAI-assisted knowledge-based solution which I had previously shared is called Ask Hackett AI.

Ted Fernandez: Another critical investment that we have made is to also build our own GenAI-assisted knowledge base solution, which I previously shared is called Ask Hackett AI. Ask Hackett leverages our proprietary Hackett benchmarking, executive advisory, business transformation intelligence, which allows us to define and enable Digital World Class performance for clients. Our IP will also be increasingly leveraged across all of our market-facing service delivery platforms. We are continually ingesting and indexing all IP in order to make sure that it is available to support our clients as well as our associates. On the talent side, competition for experienced executives with high technology agility continues. Overall turnover continued at acceptable levels during the quarter, and we expect that trend to continue.

Speaker #1: Ask Hackett leverages our proprietary Hackett benchmarking, executive advisory, and business transformation intelligence, which allows us to define and enable digital world-class performance for clients. Our IP will also be increasingly leveraged across all of our market-facing service delivery platforms.

Speaker #1: We are continually ingesting and indexing all IP in order to make sure that it is available to support our clients as well as our associates.

Speaker #1: On the talent side, competition for experienced executives with high technology agility continues. Overall turnover continued. At acceptable levels during the quarter. And we expect that trend to continue.

Speaker #1: Lastly, even though we believe that we have the client base and offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our IP platforms and transformation expertise and can add scope, scale, or capability, which can accelerate our growth.

Ted Fernandez: Lastly, even though we believe that we have the client base and offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our IP, platforms, and transformation expertise, and can add scope, scale, or capability, which can accelerate our growth. 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 our people, no matter what challenges we may encounter. That concludes my comments. Let me turn it over to our operator, and let us move on to the Q&A section of our call. Operator?

Speaker #1: As always, let me close by congratulating our associates on our innovation and performance, and by thanking them for their tireless efforts. I always urge them to stay highly focused on our clients and our people, no matter what challenges we may encounter.

Speaker #1: Those conclude my comments. Let me turn it over to our operator and let us move on to the Q&A section of our call. Operator?

Speaker #2: Thank you. Thank you, sir. At this time, if you would like to ask a question, please press star one. And you may press star two to withdraw your question.

Operator: Thank you. Thank you, sir. At this time, if you would like to ask a question, please press star one, and you may press star two to withdraw your question. Our first caller is George Sutton with Craig-Hallum. Your line is open, sir.

Speaker #2: Our first caller is George Sutton with Craig Hellem. Your line is open, sir.

Speaker #3: Thank you. Ted, you threw out a couple of big nuggets there, so I wanted to bite. First, on the six-month demonstration and testing work that you've been doing with what sounds like a potential reseller and partner, can you just talk a little bit more about what the ultimate outcome you're looking for from that specific relationship would be?

George Sutton: Thank you. Ted, you threw out a couple big nuggets there, so I wanted to bite. First, on the six-month demonstration and testing work that you've been doing with what sounds like an international potential reseller and partner, can you just talk a little bit more about what the ultimate outcome you're looking for from that specific relationship would be?

Ted Fernandez: Yes. Look, it goes without saying that I would have loved to have been able to announce the agreement on the call. But we expect to do so shortly. But with that said, look, the capabilities of AI Explorer are really distinct. I know it sounds repetitive, but I want you to know that we believe we are just, we have extreme capability, which continues to be very distinct. Our ability to first simulate an entire industry's AI opportunities across 26 industries, and our ability to do so with AI Explorer, are distinct. Our ability to capture a client's automation footprint inside of the client, so that we understand any automation considerations the client wants to consider or make, we believe are distinct.

Speaker #4: Yes. Look, it goes without saying that I would have loved to have been able to announce the agreement on the call. But we expect to do so shortly.

Speaker #4: But with that said, look, the capabilities of AI Explorer are really distinct. I know it sounds repetitive, but I want you to know where we believe we are just we have extreme capability which continues to be very distinct.

Speaker #4: Our ability to first simulate an entire industry's AI opportunities across 26 industries and our ability to do so with AI Explorer are distinct. Our ability to capture clients' automation footprint inside of the client so that we understand any automation considerations the client wants to consider or make we believe are distinct.

Speaker #4: Our ability to evaluate the return on investment on a any AI solution which a client asks us to review, we believe it may not be distinct, but in that performance intelligence side, gosh, our IP is as strong or stronger than anyone.

Ted Fernandez: Our ability to evaluate the return on investment on any AI solution which a client asks us to review, we believe it may not be distinct, but in that performance intelligence side, gosh, our IP is as strong or stronger than anyone. And, as you know, George, we've had that acquisition from LeewayHertz allowed us to expand the solution design module of AI Explorer to just incredible capabilities. We call this our ability to develop an 80% solution with specific client input that we require. But our ability to do that, to develop a detailed functional design, and soon to extend that same capability within ZBrain to a technical design, we think are also gonna be highly distinct.

Speaker #4: And as you know, George, we've had that acquisition from LeewayHertz. It allowed us to expand the solution design module of AI Explorer to just incredible capabilities.

Speaker #4: We call this our ability to develop an 80% solution with specific client input that we require. But our ability to do that, to develop a detailed functional design, and soon to extend that same capability within ZBrain to a technical design, we think are also going to be highly distinct.

Speaker #4: It is those capabilities that will allow a partner to provide us the required information we normally request or they provide us. And their trying to pursue a specific area of their business or evaluate the performance of specific area of their business.

Ted Fernandez: It is those capabilities that will allow a partner to provide us, the required information we normally request, or they provide us in their approach that they're trying to pursue a specific area of their business, or evaluate the performance of a specific area of their business. Our ability to use our AI Explorer capability to provide, our partners with, and their clients with significant productivity ideas, supported by digital agentic workflows with a Hackett prepared return on investment is very valuable. And, I believe that those organizations that are considering strategic alliances with us, is because of the Hackett, the credibility of the brand, and then the unique capability of AI Explorer.

Speaker #4: Our ability to use our AI Explorer capability to provide our partners and their clients with significant productivity ideas, supported by detailed agentic workflows with a Hackett-prepared return on investment, is very valuable.

Speaker #4: And I believe that those organizations that are considering strategic alliances with us do so because of the credibility of the brand, and then the unique capability of AI Explorer.

Speaker #4: So that, I would describe that relationship, and leveraging that for existing or actually prospecting new clients, would be where we intend to initially start.

Ted Fernandez: So, that I would describe that relationship and leveraging that for existing or actually prospecting new clients would be where we intend to initially start.

George Sutton: Just to be clear on this relationship, if you do get this signed, that'd be something you would announce inter-quarter, hypothetically?

Speaker #3: Just to be clear on this relationship, if you do get this signed, that'd be something you would announce intra-quarter, hypothetically?

George Sutton: Just to be clear on this relationship, if you do get this signed, that'd be something you would announce inter-quarter, hypothetically?

Speaker #4: Yes. If we get it signed, they would like to announce it as I don't know if as much as we do. But they obviously would like to announce that relationship as well.

Ted Fernandez: Yes. If we get it signed, they would like to announce it as, as, I don't know if as much as we do. But they obviously would like to announce that relationship as well.

Speaker #3: Okay. And then separately, you actually mentioned ServiceNow and going forward with that partnership. Can you just give us a sense of how you'd be going to market with them, and any more details on that plan?

George Sutton: Okay. And then separately, you actually mentioned ServiceNow and going forward with that partnership. Can you just give us a sense of how you'd be going to market with them, and any more details on that plan?

Ted Fernandez: You know, we were trying to do something with them for months, and they were looking for specific go-to-market areas to use, again, this unique capability we have, and to see what the impact is in introducing their existing platform capabilities. So it's a pilot to target. We've recommended and we've discussed a specific industry that again the hope is to be able to launch that before the end of the month.

Speaker #4: We were trying to do something with them for months, and they were looking for specific go-to-market areas. Again, this unique capability we have, and to see what the impact is in introducing their existing platform capabilities.

Speaker #4: So, it's a pilot to target we've recommended, and we've discussed a specific industry that, again, the hope is to be able to launch that before the end of the month.

Speaker #3: Gotcha. And just one final question. You mentioned transition costs from GenAI, meaning your headcount can actually now be reduced in certain areas due to GenAI.

George Sutton: Got you. And just one final question. You mentioned transition costs from GenAI, meaning your headcount can actually now be reduced in certain areas due to GenAI. So, that's interesting, because obviously, the other parts we're talking about are go-to-market strategies with AI. This would be, your costs are actually starting to come down because of GenAI. Can you just give us a better sense there?

Speaker #3: So that's interesting because obviously the other parts we're talking about are go-to-market strategies with AI. This would be your costs are actually starting to come down because of GenAI.

Speaker #3: Can you just give us a better sense there?

Speaker #4: Yes. If you will recall, we launched two new platforms at the end of the year, which include XT for our transformation professionals—this is where we do operational modeling and transformation roadmaps for clients—as well as AIX, originally known as Accelerator, which we use to help deliver our technology implementation solutions.

Ted Fernandez: Yes. If you will recall, we launched two new platforms at the end of the year, which include XT for our transformation professionals. This is where we do operational modeling and transformation roadmaps for clients, as well as AIX, originally known as Accelerator, which we use to help deliver our technology implementation solutions. We've rolled out that on the transformation side. I believe that there's now 10 clients where we have, we are leveraging this new capability to deliver the targeted outcome for the client. And, we're. We think we're seeing productivity improvements that will, that could result in some numbers that will be in excess of 25%. Let me just leave it there. And, as you and I have mentioned, we don't quote, we don't quote rates anymore.

Speaker #4: We've rolled out that on the transformation side. I believe that there's now 10 clients where we have we are leveraging this new capability. The targeted outcome for the client and we think we're seeing productivity improvements that will that could result in some numbers that will be in excess of 25%.

Speaker #4: Let me just leave it there. And as you and I have mentioned, we don't quote rates anymore. We quote outcomes, and we put a value on that outcome.

Ted Fernandez: We quote outcomes, and we put a value on that outcome, and the client can determine whether that outcome can be delivered by anyone else as powerfully and as efficiently as we can. And if they can't, then we will realize margin expansion, as we believe we've already started to experience in Q1. The Accelerator platform launched initially through our OneStream group, and it's now rolling out into Oracle. And that platform, the best story for that platform is that we were asked to jump in late in the game to a very significant OneStream opportunity in an industry, I'll just say, we had limited capabilities in.

Speaker #4: And the client can determine whether that outcome can be delivered by anyone else as powerfully and as efficiently as we can. And if they can't, then we will realize margin expansion, as we believe we've already started to experience in Q1.

Speaker #4: The Accelerator platform launched initially through our OneStream group. And it's now rolling out into Oracle. And in that platform, the best story for that platform is that we were asked to jump in late in the game to a very significant OneStream opportunity in an industry I'll just say we had limited capabilities in.

Ted Fernandez: The power of our platform to demonstrate how we are able to execute, configure, build, test that OneStream opportunity was powerful enough for us to come in late in the game and win this over a list of who's who. We expect similar results, so we've now got it in front of two or three other opportunities. So we're just seeing some success, but we clearly know that we have built the initial capability, looks at how to really eliminate what I'll call production or data gathering or execution costs that would have been generally done by some of our junior consultants. Not that we have many of them, because, well, that's not the way our enterprise model works.

Speaker #4: The power of our platform to demonstrate how we are able to execute, configure, build, and test that OneStream opportunity was powerful enough for us to come in late in the game and win this over a list of who's who.

Speaker #4: We expect similar results. So we've now got it in front of two or three other opportunities. So we're just seeing some success. But we clearly know that we have built the initial capability—looks at how to really eliminate what I'll call production or data gathering or execution cost that would have been generally done by some of our junior consultants—not that we have many of them, because that's not the way our enterprise model works.

Speaker #4: But there is no doubt that our ability to take that and deliver a much powerful outcome on a similar opportunity that we would have had without the new AIX capability is distinct.

Ted Fernandez: But, there is no doubt that our ability to take that and deliver a much powerful outcome on a similar opportunity that we would have had without the new AIX capability, is distinct, and it's significant. And if we're able to demonstrate that enhanced capability with a tremendous, with a high level of confidence, leveraging the IP that, and, and the brand, the Hackett brand that people come to rely on and trust. We're going to capture a meaningful amount of those gains. The client will get a higher and better result and accelerated speed, and, we will be able to provide that with a combi- I'll call it, people leading the, obviously leading the implementations, but being, gosh, powerfully supported by these new platforms.

Speaker #4: And it's significant. And if we're able to demonstrate that enhanced capability with a tremendous, with a high level of confidence, leveraging the IP and the brand—the Hackett brand—that people come to rely on and trust, we're going to capture a meaningful amount of those gains.

Speaker #4: The client will get a higher and better result in accelerated speed. And we will be able to provide that with a—I'll call it—people leading, obviously leading the implementations, but being, gosh, powerfully supported by these new platforms.

Ted Fernandez: Since we just rolled out the platforms and we started and launched these, all these new engagements, we saw that there was both an opportunity that we were gonna have additional people that we may not need under this new service delivery environment. So, we decided that we should make sure that the marketplace knew that we were realizing those productivity gains and how they were impacting our operating results.

Speaker #4: Since we just rolled out the platforms, and we started and launched all these new engagements, we saw that there was both an opportunity that we were going to have additional people that we may not need under this new service delivery environment.

Speaker #4: So we decided that we should make sure that the marketplace knew that we were realizing those productivity gains. And how they were impacting our operating results.

Speaker #3: Super. Thank you. Appreciate it.

George Sutton: Super. Thank you. Appreciate it.

Speaker #4: Thank you, George.

Ted Fernandez: Thank you, George.

Speaker #1: Thank you. Once again, if you would like to ask a question, please press star one. Our next caller is Jeff Martin with Roth Capital Partners. Your line is open, sir.

Operator: Thank you. Once again, if you would like to ask a question, please press star one. Our next caller is Jeff Martin with Roth Capital Partners. Your line is open, sir.

Speaker #5: Thank you. Good evening, Ted and Rob. Ted wanted to dive in. You mentioned at the start of the call that your products are all licensable now.

Jeff Martin: Thank you. Good evening, Ted and Rob. Ted, I wanted to dive in. You mentioned at the start of the call that your products are all licensable now. Just curious how things are progressing on the licensing front.

Speaker #5: Just curious, how are things progressing on the licensing front?

Ted Fernandez: We just, like we said, announced that, I believe it was the first week of January. So, we expect to start licensing the product here as we progress throughout the year. The product has been utilized in the version 4 capabilities to assist the delivery of a consulting engagement. But after a consulting engagement, once the client's exposed to the platform, now, if they would like to continue to either ideate, discover opportunities on their own, because the module now resulted in 2 modules, an AI Explorer module and a solutioning module, the client has the option to license either one or both, depending on how they wanna avail themselves to that capability.

Speaker #4: Just like we said, we announced that—I believe it was the first week of January. So, we expect to start licensing the product here as we progress throughout the year.

Speaker #4: The product has been utilized in the version 4 capabilities to assist the delivery of a consulting engagement. But after a consulting engagement, once the client's exposed to the platform, now if they would like to continue to either ideate, discover opportunities on their own—because the module now resulted in two modules, an Ideation Explorer module and a Solutioning module—the client has the option to license either one or both depending on how they want to avail themselves of that capability.

Speaker #4: So we expect the clients to expose clients to version five as we are on all the, on any and all the engagements that we're launching.

Ted Fernandez: So, we expect the clients to expose clients to version 5, as we are on any and all the engagements that we're launching, and then we expect clients to decide how they would like to avail themselves to those platforms. So they'll make that determination.

Speaker #4: And then we expect clients to decide how they would like to avail themselves of those platforms. So they'll make that determination.

Speaker #5: Got it. And then you mentioned that you're not quoting on rate anymore—you're quoting on outcome. I was curious if you could elaborate on that so we can understand it from a financial model point of view.

Jeff Martin: Got it. And then you mentioned that you're not quoting on rate anymore, you're quoting on outcome. I was curious if you could elaborate on that so we can understand that, you know, from a financial model point of view.

Ted Fernandez: Well, we evaluate each job and respond to the client requirements, and we quote the completion of the task that the clients has, either in an RFP or whatever the detailed request is, and we quote that fee. If the client wants to have a rate discussion, which some may, then we talk about the licensing aspect of the platform during the engagement. Most of the clients want to focus on specific deliverables, and the outcome from those deliverables, then we quote a fee. So we know we're in a transition period, but we are not making our platform available to clients for free. Let's make sure that's clear.

Speaker #4: Well, we evaluate each job and respond to the client requirements. And we quote the completion of the task that the client has either in an RFP or whatever the detailed request is.

Speaker #4: And we quote that fee. If the client wants to have a rate discussion, which some may, then we talk about the licensing aspect of the platform during the engagement.

Speaker #4: If the client wants to—most of the time, the client wants to focus on specific deliverables, and the outcome from those deliverables, then we quote a fee.

Speaker #4: So we know we're in a transition period. But we are not making our platform available to clients for free. Let's make sure that's clear.

Speaker #4: We believe that it results in an accelerated deployment, which the client values, and value realization, and a greater value to any of these engagements that we have—whether we are doing AI discovery and solutioning with Explorer, business transformation with XT, or an Oracle or OneStream implementation, for now using AIX.

Ted Fernandez: We believe that it results in an accelerated deployment, which the client values, and value realization and a greater value to any of these engagements that we have, whether we are doing AI discovery and solutioning with Explore, business transformation with XT, or an Oracle or OneStream implementation for now using AIX.

Speaker #5: Great. And then I was curious, on this large international channel partner, would that be a relationship where you could leverage some of their implementation, or would you need to continue to staff up additional implementation resources as you go along?

Jeff Martin: Great. Then I was curious on, on this, you know, large international channel partner, would that be a relationship where you could leverage their, some of their implementation, or would you need to continue to staff up additional implementation resources as you go along?

Ted Fernandez: Entirely up to them. They obviously have been exposed and understand the capability of our engineering capabilities. So it'll be determined on an engagement basis.

Speaker #4: Entirely up to them. They obviously have been exposed in understand the capability of our engineering capabilities. So it'll be determined on an engagement on an engagement on an engagement basis.

Ted Fernandez: Entirely up to them. They obviously have been exposed and understand the capability of our engineering capabilities. So it'll be determined on an engagement basis.

Speaker #5: Thank you.

Jeff Martin: Thank you.

Speaker #1: Thank you. Our next caller is Vincent Colicchio with Barrington Research. Your line is open, sir.

Operator: Thank you. Our next caller is Vincent Colicchio with Barrington Research. Your line is open, sir.

Speaker #3: Yeah, Ted, can you give us an update on the pieces within the SBT business, how they're trending?

Vincent Colicchio: Yeah, Ted, can you give us an update on the pieces within the SPT business, how they're trending?

Ted Fernandez: Specifically, which ones are you thinking about, Vince? Is there something specific you have in mind, or?

Speaker #4: Specifically, which ones are you thinking about, Vince? Is there something specific you have in mind, or?

Ted Fernandez: Specifically, which ones are you thinking about, Vince? Is there something specific you have in mind, or?

Speaker #3: No, nothing specific—just to get a sense for how things are trending. You talked about AI—the AI piece.

Vincent Colicchio: No, nothing specific. Just to get a sense for how things are trending. You know, you talked about AI, the AI piece.

Ted Fernandez: We, clearly, the number of clients that have an AI element is going to be increasing meaningfully throughout the year. The other big pieces that are in there, the advisory business actually did pretty well, given the current environment. So, the integration of our GenAI or the introduction of our GenAI program, and now the fact that we're also providing our members with access to ideation capabilities of AI Explorer, so that they can get, I mean, exposed to actual actionable AI opportunity identification through their program, we believe is also helping. So, that performed, I'm gonna say, in the environment and seeing what others have presented, we performed pretty well.

Speaker #4: We clearly see the number of clients—the number of clients that have an AI element—is going to be increasing meaningfully throughout the year. The other big pieces that are in there, the advisory business, actually did pretty well given the current environment.

Speaker #4: So, the integration of our GenAI, or the introduction of our GenAI program, and now the fact that we’re also providing our members with access to the ideation capabilities of AI Explorer, so that they can get—I mean, exposed to actual, actionable AI opportunity identification through their program.

Speaker #4: We believe it is also helping. So, that performed—I'm going to say, in the environment and seeing what others have presented, we performed pretty well.

Speaker #4: And OneStream, well, I mean, that group is up sequentially. SBT is, as Rob says, expected to be up sequentially from Q4 to Q1. Same with Oracle.

Ted Fernandez: And, OneStream, well, I mean, that group is up sequentially. SAP, as Rob said, is expected to be up sequentially from Q4 to Q1. Same with Oracle, same with SAP. Well, maybe not sequential SAP, because of the bar, but year-on-year, SAP is in a very strong position. So, again, we... Look, in 2025, we saw the, if you wanna call it, demand disruption and the, and the confusion I referred to at the beginning. We believe that new capabilities, better understanding of adoption, and if the technology providers actually describe their capabilities a little bit more precisely, I think it will help all of us as well. But, I don't know if that's the background that you wanted, or do you have some more specific bits?

Speaker #4: Same with SAP. Well, maybe not sequentially SAP because of the bar, but year-on-year SAP is in a very strong position. So again, we look, in '25 we saw the—if you want to call it—demand disruption and the confusion I referred to at the beginning.

Speaker #4: We believe that new capabilities, a better understanding of adoption, and, if the technology providers actually describe their capabilities a little bit more precisely, I think it will help all of us as well.

Speaker #4: But I don't know if that's the background that you wanted or do you have something more specific, Vince?

Speaker #3: No, that's helpful. And then, with SAP and Oracle improving and expected to improve throughout the year, I assume we'll still see a mixed shift towards AI for the next 12 months.

Vincent Colicchio: No, that's helpful. And then with SAP and Oracle improving and expected to improve throughout the year, I assume we'll still see a mix shift towards AI for the next 12 months. Is that accurate?

Speaker #3: Is that accurate?

Speaker #4: Oh, yes. Absolutely.

Ted Fernandez: Oh, yes, absolutely.

Speaker #3: Yeah. Okay.

Vincent Colicchio: Yeah, okay.

Speaker #4: Yes. I mean, the SAP performance, as we mentioned, has been coming on for a few quarters because SAP has done a terrific job with convincing clients to migrate to S/4HANA.

Ted Fernandez: Yes.

Vincent Colicchio: Good thing.

Ted Fernandez: I mean, the SAP performance, as we mentioned, you know, has been coming on for a few quarters, 'cause SAP has done a terrific job with convincing clients to migrate to S/4HANA. So, that's reflective on our business. And, the Oracle sequential decline is important for us, so we continue to be very hopeful that with that increase and with the AI accelerator capability rolling out inside of that practice, that it gives our Oracle group an opportunity to start growing in 2026, resume growth in 2026.

Speaker #4: So that's reflective on our business. And the Oracle sequential decline is important for us. So we continue to be very hopeful that, with that increase, and with the AI accelerator capability rolling out inside of that practice, it gives our Oracle group an opportunity to start growing in 2026—resume growth in 2026.

Speaker #3: Thanks, Ted.

Vincent Colicchio: Thanks, Ted.

Speaker #1: Thank you. And at this time, I have no further questions. I would now like to turn the call back over to Mr. Fernandez.

Operator: Thank you. At this time, I show no further questions. I would now turn the call back over to Mr. Fernandez.

Speaker #4: I'd like to thank everyone for participating in our fourth-quarter earnings call. Look forward to updating everyone again when we report the first quarter. Thank you, everyone.

Ted Fernandez: I'd like to thank everyone for participating on our Q4 earnings call. Look forward to updating everyone again when we report the Q1. Thank you, everyone.

Operator: Thank you. This concludes today's conference call. You may go ahead and disconnect at this time.

Q4 2025 Hackett Group Inc Earnings Call

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