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01/11 11:30
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows strong growth in Gen AI engagements and improved gross margins. Despite a decline in Oracle and SAP segments, the company’s focus on AI and strategic acquisitions like LeewayHertz are promising. The Q&A reveals confidence in scaling AI capabilities and potential revenue growth from the ZBrain joint venture. The stock repurchase indicates shareholder confidence. While cash balances decreased, the overall strategy and guidance suggest positive momentum. Given the lack of market cap data, assuming a moderate impact, the stock price is likely to rise by 2% to 8%.
Total Revenue $77.9 million, up 1% year-over-year. The growth was driven by the performance of the DSBT segment, particularly from Gen AI engagements.
Revenue Before Reimbursements $76.2 million, up 1% year-over-year. This figure was near the high end of quarterly guidance.
Global S&BT Segment Revenue $43.4 million, with revenues before reimbursements at $42.6 million, an increase of 6% year-over-year. Growth was driven by Gen AI consulting and implementation offerings, partially offset by weaknesses in OneStream and eProcurement.
Oracle Solutions Segment Revenue $21.1 million, with revenues before reimbursements at $20.4 million, a decrease of 3% year-over-year. The decline was primarily due to the wind down of a large post go live engagement.
SAP Solutions Segment Revenue $13.4 million, with revenues before reimbursements at $13.2 million, a decrease of 8% year-over-year. This was driven by a strong Q1 comparison from the previous year.
Adjusted Gross Margin 43.4%, up from 41.4% year-over-year. The improvement was primarily driven by higher margin Gen AI consulting and implementation revenue.
Adjusted SG&A $18.4 million, or 24.1% of revenues before reimbursements, compared to $17.1 million or 22.6% in the prior year. The increase was due to costs associated with the LeewayHertz and ZBrain acquisition and increased recruiting costs.
Adjusted EBITDA $15.7 million, or 20.7% of revenues before reimbursements, compared to $15.2 million or 20% in the prior year.
GAAP Net Income $3.1 million, or diluted earnings per share of $0.11, compared to $8.7 million or diluted earnings per share of $0.32 in the prior year. The decrease was impacted by non-cash stock compensation and acquisition-related expenses.
Adjusted Net Income $11.6 million, with adjusted diluted net income per common share of $0.41, compared to $0.39 in the prior year.
Cash Balances $9.2 million at the end of Q1 2025, down from $16.4 million at the end of the previous quarter.
Net Cash from Operating Activities $4.2 million, primarily driven by net income adjusted for non-cash activity.
Days Sales Outstanding (DSO) 73 days, up from 66 days in the previous quarter and 68 days in the prior year, primarily due to extended terms on large client engagements.
Stock Repurchase 379,000 shares repurchased at an average of $30.93 per share, totaling approximately $11.7 million.
Total Debt Outstanding Approximately $18 million at the end of Q1 2025.
Gen AI Engagements: Strong revenue growth from Gen AI engagements, which favorably impacted gross margin.
AI Explorer and ZBrain Platforms: Differentiated capabilities of AI Explorer and ZBrain platforms allow for competitive advantage in the Gen AI space.
Gen AI Solutioning Advisory Program: Launched a premium Gen AI solutioning advisory program targeted at AI leaders, CIOs, and CTOs.
Ask Hackett AI: Developed a Gen AI assisted knowledge-based solution to enhance delivery of insights.
Aixelerator Initiative: Initiative aimed at improving efficiency and quality of technology implementation services.
Market Demand for Gen AI: Increased investment in Gen AI initiatives expected in 2025, with a focus on high feasibility and high impact areas.
Joint Venture with LeewayHertz: Creation of a joint venture to combine AI Explorer and ZBrain platforms for Gen AI ideation and implementation.
Strategic Relationships and Acquisitions: Exploring strategic relationships and acquisitions to extend Gen AI capabilities.
Stock Buyback Program: Utilizing strong cash flow from operations for stock buyback program.
Consultant Headcount: Increased consultant headcount driven by Gen AI acquisition and hiring.
Cash Flow from Operations: Net cash provided from operating activities was $4.2 million.
Focus on Gen AI Transformation: Aggressive pivot to Gen AI enabled transformations to create unique value opportunities.
Integration of Gen AI Capabilities: Integrating Gen AI capabilities across all offerings to enhance service delivery.
Economic Factors: Demand for digital transformation is strong but impacted by economic concerns and competing priorities, leading to increased uncertainty in client decision-making.
Competitive Pressures: The company faces competition in the rapidly growing Gen AI space, necessitating continuous innovation and differentiation of their offerings.
Regulatory Issues: Uncertainty surrounding tariff negotiations may affect short-term client decision-making.
Supply Chain Challenges: The company is experiencing extended terms and milestone deliverables on several large client engagements, impacting cash flow and accounts receivable.
Operational Risks: Weakness in OneStream and e-procurement practices partially offset revenue growth in the Global S&BT segment.
Talent Acquisition: Competition for experienced executives with high technology agility remains a challenge, impacting recruitment efforts.
Gen AI Engagements: Strong revenue growth from Gen AI engagements, which favorably impacted gross margin.
AI Explorer and ZBrain Platforms: Differentiated capabilities of AI Explorer and ZBrain allow for competitive advantage in Gen AI solutions.
LeewayHertz Acquisition: Acquisition of LeewayHertz to enhance Gen AI capabilities and create a joint venture for Gen AI ideation and implementation.
Aixelerator Initiative: New initiative to improve efficiency and quality of technology implementation services using Gen AI.
Ask Hackett AI: Development of a Gen AI assisted knowledge-based solution to enhance client insights and service delivery.
Q2 2025 Revenue Guidance: Estimated total revenue before reimbursements for Q2 2025 to be in the range of $76 million to $77.5 million.
Adjusted Net Income Guidance: Expected adjusted diluted net income per share for Q2 2025 in the range of $0.37 to $0.39.
Adjusted Gross Margin Guidance: Expected adjusted gross margin for Q2 2025 to be approximately 43% to 44%.
Adjusted EBITDA Guidance: Expected adjusted EBITDA as a percentage of revenues before reimbursements to be in the range of approximately 21% to 22%.
Cash Flow Guidance: Expect cash flow from operations to be up on a sequential basis.
Dividend per share: $0.12 per share for the second quarter of 2025, to be paid on July 7, 2025.
Stock buyback program: Repurchased 379,000 shares at an average of $30.93 per share, totaling approximately $11.7 million.
Remaining stock repurchase authorization: $21.3 million.
The earnings call summary reveals mixed signals: strong Gen AI-driven growth potential and strategic alliances contrast with declining revenues and net income. The Q&A section highlights management's confidence in alliances and AI advancements, but lacks clarity on economic impacts and alliance timelines. Market reaction may be neutral, as positive AI developments are offset by financial declines and restructuring costs.
The earnings call reveals mixed signals: strong Gen AI engagement and strategic alliances are positive, yet financial metrics show slight declines, and there's uncertainty in strategic partnerships and market conditions. Positive guidance and cash flow improvements are offset by GAAP net income decline and vague management responses. Given these factors, the stock is likely to remain stable in the short term.
The earnings call shows strong growth in Gen AI engagements and improved gross margins. Despite a decline in Oracle and SAP segments, the company’s focus on AI and strategic acquisitions like LeewayHertz are promising. The Q&A reveals confidence in scaling AI capabilities and potential revenue growth from the ZBrain joint venture. The stock repurchase indicates shareholder confidence. While cash balances decreased, the overall strategy and guidance suggest positive momentum. Given the lack of market cap data, assuming a moderate impact, the stock price is likely to rise by 2% to 8%.
The earnings call reveals strong financial performance with revenue and EPS growth, improved margins, and a substantial cash flow increase. Despite some challenges in specific segments, the company shows promising GenAI engagement, strategic acquisitions, and a positive outlook for 2025. Stock repurchase and strong SAP sales further bolster confidence. The Q&A highlights robust client engagement and positive pipeline conversion, supporting a positive sentiment.
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