Ted Fernandez - Chairman and Chief Executive Officer Rob Ramirez - Chief Financial Officer.

Morris Ajzenman - Griffin Securities Bill Sutherland - Emerging Growth Equities Jeff Martin- ROTH Capital Partners George Sutton - Craig-Hallum.

Welcome to the Hackett Group Third Quarter Earnings Call. Your lines have been placed on a listen-only mode until the question-and-answer session. Please be advised that the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO; and Mr. Rob Ramirez, Chief Financial Officer. Thank you. Mr. Ramirez, you may begin..

Thank you, Operator. Good afternoon, everyone, and thank you for joining us to discuss The Hackett Group's third quarter 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, CFO. A press announcement was released over the wires at 4:08 P.M 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 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.

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. Actual results may vary.

These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors contained in our SEC filings. At this point, I would like to turn it over to Ted..

Thank you, Rob. As we customarily do, I will start the call by reviewing the quarterly highlights and then turn it back over to Rob and ask him to comment on operating results, cash flow and then provide some commentary and details around our guidance. Rob will then turn it back over to me.

I will provide some market and strategic related comments and then we will open it up for Q&A. Let me start by welcoming everyone to Hackett Group's third quarter earnings call. This afternoon, we reported revenues of $60.4 million and pro forma earnings per share of $0.16, both at the high end of our guidance.

As planned, improving results in Europe and solid US momentum, along with a lower consolidated tax rate, allowed us to exceed last year’s third quarter results by 33%. Half of this improvement came from the improved operating results and the other half came from the lower tax rate.

In Europe we experienced improved demand, which allowed the region to positively contribute to our quarterly results for the first time this year. In addition, we continue to build up our new EPM capability in Europe, which we believe will further enhance our growth opportunity for the region.

In the U.S both Hackett and our ERP solutions teams as expected, were impacted by some project transitions which slowed our growth from the solid results we experienced in the first half of the year. However, also as expected, we plan to resume the same -- our first half of year growth rate in the fourth quarter.

On the balance sheet side, we continued to be active with our stock repurchase program throughout the quarter. Additionally, at our recent board meeting, the board approved a 20% increase to our annual dividend.

This increase was to further reflect our desire to reward those shareholders that are long-term holders of our stock as part of our overall strategy to return capital to shareholders.

On the investment front, we're continuing to see the synergies from the complementary capability that we brought on board with the acquisition of our EPM application AMS Group in the first quarter. Additionally, we continue to develop and attract talent and look for all ways to expand our brand.

On the intellectual property front, we continue to look for ways to leverage our Hackett Performance Exchange as well as our benchmarking and executive advisory offerings through new channels. I will comment about these opportunities in more detail in my strategic overview section of our call.

I'll also comment further on market conditions and some specific go-to-market initiatives, but let me first ask Rob to provide details on our operating results, cash flow and also comment on guidance.

Rob?.

Thank you, Ted. As I typically do, I will cover the following topics during our call. An overview of our 2014 third quarter results, along with an overview of related key operating statistics, an overview of our cash flow activities during the quarter and I will then conclude with a discussion on our financial outlook for the fourth quarter of 2014.

For purposes of this call, any references to Hackett Group will specifically exclude ERP solutions. Correspondingly, I will comment separately regarding the financial results of The Hackett Group, ERP Solutions and the total company. Please note that all references to gross revenues in my discussion represent net revenues plus reimbursable expenses.

Additionally, references to pro forma results specifically exclude non-cash stock compensation expense, intangible asset amortization expense, non-recurring acquisition and restructuring charges and assumes a normalized tax rate.

For the third quarter of 2014, total company gross revenues were $60.4 million, a 4% increase on a year-over-year basis and at the high end of our third quarter's guidance. Gross revenues for The Hackett Group, which excludes ERP solutions, were $51.4 million in the third quarter of 2014, an increase of 6% on a year-over-year basis.

Hackett U.S revenues were up 2% on a year-over-year basis, but down 3% excluding the Technolab acquisition made in the first quarter of 2014. As expected, U.S revenues we impacted by the timing of projects that were in the process of completion and others that were in the process of starting.

However, U.S revenue is expected to resume its growth in Q4 consistent with the first half of the year. Hackett international revenues were up 20% on a year over year basis, with half of the growth coming from the Technolab acquisition.

International revenues also benefited from improving European growth as well as more favorable comparable base in the prior year. Hackett Group annualized gross revenue per professional was $368,000 in the third quarter of 2014 as compared to $358,000 in the third quarter of 2013 and $359,000 in the previous quarter.

Gross revenue from our ERP solutions Group, which now consists of our SAP Group, totaled $9.1 million, a year over year decrease of 2%. ERP Solutions hourly grossed realized billing rate per hour was $128 in the third quarter of 2014, as compared to $132 in the prior year.

This includes the impact of our offshore resources, which approximate 45% of our ERP implementation resources overall. ERP solution consulting utilization was 72% for both the third quarter of 2014 and 2013.

As we discussed last quarter, our acquisition of Technolab and continued growth in our SAP application managed services offering has continued to increase the portion of our total Hackett revenues that relates to AMS for both the company’s SAP and Oracle EPM clients respectively. These services are provided to clients on annual contracts.

Our current annual contract value now exceeds $14 million, up organically on a pro forma basis by approximately 20% on a year over year basis. We expect AMS annual contract values to continue to grow as we move into the fourth quarter of the fiscal year.

For the third quarter of 2014, total company pro forma cost of sales, excluding reimbursable expenses and stock compensation expense, totaled $33.4 million or 61% of net revenues as compared to $33.1 million or 64% of net revenues in the previous year.

Total company consultant headcount was 775 at the end of the third quarter as compared to 774 in the previous quarter and 718 at the end of the third quarter of 2013. Total company pro forma gross margin was 39% of net revenues in the third quarter of 2014 as compared to 36% in the third quarter of 2013.

Hackett Group’s pro forma gross margins on net revenues was 39% in the third quarter as compared to 57% in the third quarter of the previous year. On a sequential basis, Hackett Group’s gross margin improved by 270 basis points.

ERP solutions’ pro forma gross margins on net revenues was 38% in the third quarter of 2014 as compared to 32% in the previous year, primarily due to improved SAP software sales activity which is normally a good indicator of revenue growth for follow on services.

Pro forma SG&A was $14.1 million or 26% of net revenues in the third quarter of 2014 as compared to $12.5 million or 24% of net revenues in the third quarter of 2013. This increase in SG&A as incremental cost is primarily due to incentive compensational accruals and higher selling related expenses resulting from improved company performance.

For the third quarter of 2014, interest expense on borrowings under our credit facility was 173,000 as compared to 94,000 of interest expense in the third quarter of the previous year, as a result of higher average debt balances in the current year.

Total company pro forma net income for the third quarter of 2014 totaled $4.8 million or $0.16 per diluted share and was at the high end of our third quarter’s guidance. This performance compares to pro forma net income of 3.8 million or $0.12 per diluted share in the third quarter of 2013.

Our pro forma third quarter results continued to benefit by $0.02 from a lower normalized tax rate when compared to the previous year. We guided our third quarter pro forma results utilizing a 32% normalized tax rate. However, our third quarter reported results are utilizing a 30% tax rate.

The improvement in the tax rate didn’t impact our pro forma reported results as we would have also reported $0.16 at the 32% tax rate that we utilized in our guidance.

As I discussed last quarter, improved Hackett European results, including the impact of the Technolab acquisition, along with decreasing income taxes abroad, particularly in the United Kingdom, continued to have a beneficial impact on our consolidated tax rate.

As European operating results return to historical levels, we expect our consolidated tax rate to continue to decrease over time.

It is also with noting that if our current estimate of normalized tax rate were to include the impact of our tax amortization of goodwill which currently runs through 2028, it would further reduce our cash tax payment rate below low at 30%.

Total company pro forma net income for the third quarter of 2014 excludes non-cash stock compensation expense of $1.4 million, intangible asset amortization expense of 552,000 and assumes a normalized tax rate of 30% or $2.1 million.

Pro forma EBITDA on net revenues in the third quarter of 2014 was $7.6 million or 14% of net revenues as compared to $6.9 million or 13% of net revenues in the third quarter of the previous year.

GAAP net income for the third quarter of 2014 was $3.6 million, which includes non-cash stock compensation expense of $1.4 million, amortization expense of 552,000 and income tax expense of $1.3 million.

GAAP diluted earnings per share was $0.12 or up to 50% for the third quarter of 2014 as compared to diluted earnings per share of the $0.08 in the third quarter of 2013.

At the end of the third quarter of 2014, the company had approximately $20 million of income tax loss carried forward remaining in the US for both state and federal purposes and approximately $15 million in foreign tax jurisdictions respectively.

As a result, for tax purposes, we will continue to have the ability to offset most of our U.S and international tax liabilities for the foreseeable future. The company’s cash balances were $10.6 million at the end of the third quarter of 2014 as compared to $10.8 million at the end of the previous quarter.

This decrease in the third quarter was primarily attributable to cash utilized to repurchase common stock, debt repayments and capital expenditures offset by net cash generated from operations.

Net cash provided by operating activities in the third quarter were $5.9 million, which were primarily driven by net income adjusted for non-cash items, offset by an increase in the company’s DSO. Our DSO or day sales outstanding at the end of the third quarter of 2014 were 67 days as compared to 65 days at the end of the previous quarter.

We fully expect DSO to come back down during the fourth quarter as a result of expected collections activities. During the third quarter, we purchased approximately 485,000 shares of the company stock at a cost of approximately $3 million or $6.13 per share.

As of the end of the third quarter, the company has repurchased 1.7 million shares for a total cost of $10.3 million on a year to date basis at an average cost of $6.07 per share. At the end of the third quarter, the company had approximately $4.3 million remaining in its stock repurchase program authorization.

Subsequent to the end of the third quarter, the company has repurchased another 108,000 shares for approximately $700,000 at an average cost of $6.08 per share. Capital expenditures for the quarter of approximately $943,000 increased over our normal levels relates to the rollouts of new laptops for consultants, which occurs every three to four years.

I will now turn to our guidance for the fourth quarter of 2014. But before I move to guidance for the fourth quarter, I’d like to remind everyone of the seasonality of our business.

Specifically, the increased holiday and vacation time that is taken in the fourth quarter, will decrease our available billing days by approximately 5% when compared to the third quarter.

We expect total company gross revenues for the fourth quarter of 2014 to be in the range of $57.5 million to $59.5 million with a reimbursable expense estimate of 11% on net revenues. At the mid-point of our revenue guidance, this would represent an 11% increase on a year over year basis.

On a year over year basis, we expect North American revenues to be up. Additionally, we expect Hackett International revenues primarily derived from Europe to be up strongly, partially due to favorable comparable base in the prior year.

Relative to pro forma diluted earnings per share, we expect the unfavorable impact of decreased available billing days to be partially offset by the corresponding utilization of vacation accruals and lower U.S payroll taxes resulting from reaching FICO limits.

As such, we expect our pro forma deluded earning s per share in the fourth quarter of 2014 to be in the range of $0.14 to $0.16. This compares to $0.08 in the fourth quarter of the previous year.

Our pro forma guidance excludes amortization expense, non-cash stock compensation expense, restructuring charges, acquisition related costs and includes a normalized tax rate of 30%, a decrease from the 32% normalized tax rate used in the previous quarter’s guidance as we’ve already discussed.

Sequentially, we expect pro forma gross margin in the fourth quarter to benefit from the seasonal reductions in U.S payroll related taxes resulting from reaching FICO limits and the utilization of vacation accruals, offset by decreasing revenues due to a decrease in available billing days.

As a result of our revenue guidance, we expect pro forma gross margin on net revenue to be approximately 38% to 40% in Q4. We expect pro forma SG&A and interest expense for the fourth quarter to be approximately $14 million or flat sequential. We expect fourth quarter pro forma EBITDA on net revenues to be in the range of approximately 13% to 14%.

A Ted mentioned, the company declared its annual 2014 dividend of $0.12 per share for shareholders of record on December 10, which is expected to be paid on December 22 of 2014. As a result of our decreased share count, this would result in an increased cash dividend payout of approximately $300,000 over last year’s payment.

Having said that, we expect our cash balances, excluding the impact of debt repayments, dividends and share buyback activity, to be up on a sequential basis. 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..

Thank you, Rob. As we look forward, we expect continued growth from our U.S business across nearly all of our groups. We also expect activity to be stable to improving internationally as we expand our offering and even if it comes with a more volatile decision making environment when we compare it to our U.S activity.

One of the key drivers of our growth in the U.S has been the focus on our growing wedge offerings, which are our benchmarking and executive advisory services. We’ve done this by expanding our dedicated sales channel in both of these of groups throughout the year.

Both of these offerings are highly differentiated in the marketplace and have collectively grown over 10% year-to-date and provide significant cross selling leverage for our other services.

Relative to our EPM or more broadly known as Enterprise Performance Management and in fact further described as business analytics, in September we were recognized as Oracle’s number EPM influence partner of the year in North America for the second year in a row. EPM now represent approximately 45% of our North American Hackett revenue.

Additionally, the acquisition of our EPM application management services group earlier this year, provides us both the opportunity for recurring AMS revenue as well as the opportunity to leverage offshore resources to deliver our EPM implementation services more cost effectively.

As we have mentioned all year, we believe that some of our international volatility may be a result a more limited solution offering in Europe. We will continue to invest in the expansion of our EPM capability in Europe.

We believe by more closely mirroring our U.S capabilities in Europe, we can improve our ability to grow in Europe and also further strengthen our global delivery capabilities, which are important for large multinational engagements.

Our strategy is to continue to build our brand by building dedicated skills around our unmatched intellectual capital in order to serve clients strategically and whenever possible continuously. We believe that clients that leverage our IP are more likely to allow us to serve them more broadly.

IP based services enhance our opportunity to serve clients remotely, continuously and more profitably.

Our goal is to use our unique intellectual capital to establish a strategic relationship with our clients directly or through strategic alliances and to further use that entry point to introduce our business transformation and technology consulting and our application management services capability.

The strategy will allow us to increase our client base, profitability and increase revenue per client. As I continuously mention, the best example of the strategy continuous to be the revenue leverage we are experiencing from our executive advisory client base.

Specific to executive -- our executive advisor client base, our long term goal is to be able to ascribe an increasing percentage of our total annual revenues to clients who are continuously engaged with us through our executive advisory program and eventually through our Hackett performance exchange.

At the end of the quarter, our executive advisory members totaled 920 across 288 clients. In the quarter, approximately 40% of our Hackett Q3 sales were from advisory clients which continues to support the leverage of this entry or IP wedge offering.

It’s also worth mentioning that during the quarter we responded to nearly 1,300 inquiries from these members and clients, which show you that these clients are continuously seeking us out when they have an important question that they would like to discuss with us. On the Hackett performance exchange front, we continue to build our pipeline.

We believe these efforts will allow us to build a client base during the year and to help validate the value of the offering. We also continue to explore alliances that could allow us to expand the sale of this unique offering.

As I have repeatedly mentioned, this is an ambitious new offering, but if successful it could enhance our business model by creating a powerful and possibly continuous relationship with our client.

Although we continue to learn how best to sell and leverage our new HPE offerings, we now believe that this new platform will become a critical component of all of our benchmarking offerings over the next several years.

Lastly, even though we believe that we have the client based offerings and market coverage to grow our business, we continue to look for acquisitions and alliances that can strategically leverage our IP and add scope, scale or capability which could accelerate our growth. In summary, we reported strong quarterly results.

We are also optimistic that the changes in investments that we have made in Europe in our investment in our IP channel and in our AMS group, will lead to improving results.

More importantly, we continue to believe that our unique ability to combine proprietary intellectual capital with terrific talent to help our clients optimize their performance in a complex demand environment, allows us to remain top of mind with leading global companies and bodes well for our long term prospects.

As always, let me close by thanking our associates for their tireless efforts and I always urge them to stay highly focused on our clients, our people and the exciting opportunities available to our organization. Those are my comments. Let me turn it back over to the operator and ask her to open it up for Q&A.

Operator?.

(Operator Instructions). Our first question is from George Sutton. Go ahead. Your line is open..

Are you there, George? Operator, why don’t we go to the next question?.

We are going to go to Morris Ajzenman. Go ahead. Your line is open, sir..

Just a little more clarity for Europe. Results contributed for the first time in a while here.

Can you give us some sense of what the contribution was versus a year ago in the same quarter?.

It was a couple of cents up from a year ago same quarter and that compares to obviously a negative contribution in Q1 and negative penny in Q2..

I’m trying to understand, it contributed $0.02, approximate a couple of cents in this quarter.

I’m just trying to understand what was the detraction form EPS third quarter a year ago?.

From a third quarter a year ago, I would say the difference is probably slightly -- well the slightly lower U.S revenue would be one and slightly higher sales and bonus accruals which Rob mentioned..

Can you just give us a little more example of EPM in Europe? I know you heightened the leadership a quarter or two ago and you really focused on duplicating the success of enterprise performance Management in U.S and Europe.

Can you give us some examples of traction that’s gone forward and potential how this can play out for the next couple of quarters?.

I don’t know how it can play out, but I can tell you that we -- as you know the leader of Europe is the person that has an EPM consulting background. I think somewhere in the middle of Q2 we actually had our EPM technology leader actually move with his family over to London and started to become active in the marketplace.

We closed a couple of EPM technology projects. I would call them early phase type of engagements. One of them was a Fortune 100 company. We think the opportunity is there for us. We are going to -- we are investing to continue to build up that group and that capability. And yes, we think it should be a contributor to European growth in 2015..

Okay.

And lastly here, getting back to (inaudible) contribution this quarter in Europe, will that improve sequentially on ensuing quarters or in this next quarter at least? You see that further improving?.

No. We expect the net contribution to be about the same, but as Rob mentioned, when you look at that with the favorable comps, if you remember we had a pretty lousy Q4 in Europe last year. It will show up as a more meaningful revenue growth.

But on a contribution basis, if you want to compare it to last year, last year Europe cost us $0.07 on a year over year basis. We expect it to contribute a couple of cents this quarter.

That will be terrific but no, it’s not -- I wouldn’t call it accelerating yet, but I try to describe it as stable and with improving overall demand in activity across all of our offering..

(Operator instruction) our next question comes from Bill Sutherland with Emerging Growth Equities. Go ahead. Your line is open..

Thanks very much. Hey guys. Rob, just a real quick number question I didn’t catch when you were doing the gross margin split. You mention ERP was 38.

What was I guess Hackett Group?.

Hackett Group gross margins from net revenues was 39% in the quarter as compared to 37% in the prior year..

Okay. Did you describe the uptick there as far as the factors? I know you did for ERP..

The principle driver there was improved leverage on COS. If you go back and look at why the COS percentage has gone down, it’s a combination of improved revenue build, but it’s also a combination of we are focusing on our average cost for professional and overall margin opportunities as we finish up 2014 and head into 2015..

So in other words you are keeping a lid or control pay rate increases as opposed to, it wasn’t a big utilization..

No, it wasn’t a big utilization change but it was slightly improving as revenue went up, but if you recall one of the things that has always been a significant opportunity for us is that we have a -- if you want to call it top heavy, if you want to call it resource structure and the opportunity for us to build out and add some capability at the lower levels allows us over time to continue to improve our average cost per professional.

We have some combination of just slight improvements in utilization, but we are also working hard to improve the overall cost as a way of leveraging and creating more pyramid – a more pyramid structure in our model work. Far from it at this point.

It’s a meaningful opportunity that we’ve just put increased emphasis on throughout the year, especially as we look at 2015..

Just to maybe try to quantify this opportunity a little bit for folks, when you look at your -- what you are talking about is expanding the base of your pyramid obviously.

When you look at where you are versus a benchmark for consultants like you, where are you?.

The hard thing for us is what it should be in our scale, but just to give you an idea, compared to our larger competitors where they could be as many as one principle or partner to 20 and that’s without looking at some offshore model, this is onshore, I would say that typically somebody may be closer to 8 to 1, 10 to 1.

We are maybe halfway there, halfway to that lower numbers. We have tremendous capability to grow into a more typical pyramid structure versus what we have, which maybe would be better described as more of a diamond state model today.

That creates great opportunities so we are working hard to see if we can start moving that down to something more traditional and more similar to our larger competitors..

The other key question for me at least was about Europe. And obviously economic trends are a little volatile over there right now depending on what region you pick.

I guess what are you guys seeing and how’s your visibility at this point?.

I will say first overall activity for us has not been dramatically different over the last several years and it’s important to say that because what I believe overall, I believe Europe has been sluggish for a number of years, but I think there’s been some economic – there’d be some GDP and other if you want to call it economic activity trends or ratios reported in a single quarter or two quarters that people have just perceived as some significant change.

For us or for me specifically Bill, I think Europe has been at 0% to 1% overall since the financial crisis.

Yes it had its spurts, but overall if you look at it on an annual basis, I just don’t think that they’ve had any kind of real breakout performance, even though you could say that we are seeing a little better performance in the UK overall relative to the group. And we saw a little better performance in Germany 18 months ago relative to the group.

When you look at it combined and you look at that over a year period, it hasn’t been that different.

I believe that as I have said before, if we are talking about the overall growth opportunities in the U.S since financial crisis being something similar to the new normal, which is hey look, just don’t assume that you are going to grow and have the same pricing leverage that you had pre ’08.

I would say this respectfully, that I refer to Europe as maybe the new mediocre. It’s not quite as good, the opportunity there.

It’s our job and our client’s job to adjust their models to make sure that they right size or align themselves to the profitability that is available at that 0% to 1% growth rate until they demonstrate that as a region they’re going to grow better than that.

For us I think it was a way of making sure we responded to that and in addition to that added capabilities that we knew we were having great success with in the US which is EPM specifically. Those have been the two moves we’ve really focused on and I think have stabilized and allowed us to move that back into profitability.

But our hope especially when you look at those comps into 2015 is that can it also grow at a rate comparable to the U.S at least in 2015. And we’ll see what that economic activity ends up being as we see I guess several of those macro-economic factors that are impacting Europe.

I don’t expect them to change the overall activity and performance opportunity for us or our clients significantly for the balance of the year or 2015. I just really don’t..

Remind me, I know Germany is you biggest market over there.

Where’s UK at this point for you?.

No, I would say that the UK and Germany share, just sit there and one sometimes is outperforming the other.

But they dominate the majority of our business in Europe and then we serve large clients in France as well as in Holland and maybe the Broader Docks and in the Nordics that you’ll see us work with some really blue chip clients outside of those areas.

But I would say maybe broadly speaking 40%, 40% and then the other 20% a myriad of what you would call European Global 500 or 1,000 clients that reach out to Hackett or what we’ve got a long term relationship and we work with them from time to time. .

Our next question comes from Jeff Martin with ROTH Capital Partners. Go ahead, your line is open sir. .

Ted, could you give us an update on the Technolab acquisition since you completed at the end of February? And I’m curious to know if that has any impact on your gross margin..

Both the answer is that the gross margins for Technolab on average are higher than our overall margin and that’s a great thing to say for a recurring revenue business model. But it just speaks to the strength of the capability and the synergies with our business that we sought and we’re getting.

It’s important to note that half or a significant portion of that total AMS revenue that Rob reported about – reported to that had grown 20% year on year on a pro forma basis, includes the growth of that same -- of AMS activity for our SAP business as well, which operates at very similar margins. So the answer is we think it’s -- we love the team.

We think it’s a capability that extends and made a strong EPM business better. It allows us to establish continuous relationship with clients. And as I said in my script, it also allows us to leverage some offshore skills in our EPM technology implementation engagement.

Look, we’re delighted with it and think that it can be something that we can grow profitably for a very long time..

Okay, and then you mentioned a couple -- on a couple of occasions opportunities to partner up.

Could you give us an example of how you might partner and what the implications and impact of that might be down the road?.

Yeah. I couldn’t comment on implications, but I can tell you, look one is, we know or we believe we’ve built a really smart product with this Hackett performance exchange.

We believe that if we could get someone with a bigger channel in that sold software for our business, that it could help our ability to really expand the use of that client across a much broader base than we’re currently reaching. That would be an example. But another example and there’s a myriad of these things that I now I’m spending more time on.

Look, we’ve got intellectual capital that allows clients to understand how well their business is running and in many cases speaks to both process and it speaks to the technology, underlying technology.

There are a lot of companies that sell solutions, software solutions or certain functional solutions which we believe that if we could work with them so that when they sold their offerings we could somehow help the clients derive higher values from that solution that was sold more quickly or supported the transition or implementation, that we could be doing some smart things with some other solution providers.

Look, we’re looking for ideas and have conversations with these companies from time to time. I just think it’s an area of focus. I think it’s an area of opportunity and we’re just spending more time on it and we’re having more conversations like the one I’m trying to explain without being more specific.

And hopefully just like the Hackett performance exchange and what we are trying to do there in addition to the things that are improving our business already, I’d love to be able to find some really smart IP based deals that could support some really great companies and use them as larger channels for our intellectual capital and those clients ability to really leverage whatever those capabilities are more strongly.

It sounds like a lot of stuff, but it is. It’s smart ideas around how to use this unique intellectual capital that we always tout. And I think it’s absolutely the reason why these large companies come to us on some -- with some frequency..

Sure.

And then could you refresh our memory on the product transitions that you referred to in the US that support growth of that and what transpired over the past quarter and how those are speed up now?.

The best way to explain it is we have some large jobs that we are ending. But we also have some large jobs that we are starting. And some of those things just simply started a little later in the quarter and later in the third quarter.

So instead of let’s just say benefiting from two of the three months or three of the three months from several of those new engagements, we benefited later in the quarter. We planned for that and we provided guidance. It slowed our US guidance, but as we said those jobs have started.

They are going to impact our fourth quarter favorably and they will do that even though we are losing 5% available days because between Thanksgiving and holiday period all the way through New Year’s you lose quite a bit of both holiday and vacation that relates to that.

When we look at that on a year over year basis, I think it's worth mentioning again that we believe we are going to grow our business at 11%. And if you excluded the Technolab acquisition, I think you are growing 8% or 9% without Technolab.

And that’s the combination of a solid U.S momentum returning to that first half growth rate, which we did not get in third quarter and the fact that Europe is stable. So it can just continue to stay at these levels and then start improving into 2015. It creates some pretty nice prospects for us going into next year..

Okay.

That’s really timing issue?.

Yeah, it’s timing, correct..

And then Rob, do you have a number for impact on revenue from forex currency exchange?.

It was negligible this quarter. The Euro obviously went one way, but the pound went the other way. A lot of our contracts are denominated in Euros so my net impact overall was not material. .

And we work hard Jeff also to try to match as many of those expenses as we can there. The impact of us ….

The net profit ….

It was negative on the probability we translated over, but on a transitional basis like Rob said one offset the other and it hurt us enough, not worth mentioning..

Our final question comes from George Sutton with Craig-Hallum. Go ahead sir, your line is open..

I’ll try it again..

George, we thought we lost you there for a second..

We are having some line issues. They’ve been popping us on and off. Why don’t you -- A lot of my questions have been asked and answered, but one that I was curious about relevant the best practices conference in Europe. I know it was sold out. I know you had some very significant customers there.

Can you just give us a sense of what you learned from them? And I’m asking this in the context of you had a good Q3. It looks like you are going to have a good Q4.

I’m really thinking out how predictive are we now becoming as we look further into the future?.

First of all, let me go back and mention what I previously said about Europe. I think what it represented to us or what it meant to us was that the European economy continues to be sluggish.

Productivity improvement continues to be top of mind for large companies and it’s that productivity if you want to call it pressure as a result of little to no growth in the region that I think brings those attendees to our conference to understand what others are doing and to look for ways to drive productivity improvement.

So for us then the opportunity is knowing that our scale in Europe is not what it is in the U.S and knowing that the offering is more limited is to make sure that we’re expanding that offering as quickly as we could so that we take advantage of that opportunity.

But overall George, if the activity that we’re seeing has allowed us to stabilize, if we pulled in from areas on the fringe that we would try and invest in that just wasn’t worth it given the volatility in Europe and if we start getting a payback form the EPM focus in Europe in 2015, our hope is that the growth we target in Europe ought to be up.

It’s not the same close to what we hope to target in the US.

We’re going to be conservative and we’ll look at what we saw in 2014 as we look into 2015, but overall if Europe, if you put Europe this entire year on something more stable and more normalized, our results which will end up being pretty strong for the year, probably at the mid-point of the guidance you’re looking at 10% improvement of EBIDA and free cash flow.

So when you look at that -- we’re going to have that year with little to no contribution from Europe, but Europe better positioned to then contribute in 2015 and hopefully our U.S momentum continues.

There's no reason for it not to given that we think the GDP growth in the U.S even though it could be volatile, hopefully it will be better than – I’ll call it the choppy 2% we’ve being getting the last couple of years, especially when you look at what we just said. Q3 was playing closer to 3.5% and Q4 is expected to be pretty decent.

That for us are the leading indicators overall decision making and decision making activity and activity that we experience from these very large clients that we serve. I hope that puts that into overall context. We think it’s reasonable to expect for Europe to contribute at a more normalized rate.

And given the favorable comps and the decisions we made and some of the pull in we did in markets where we just didn’t have enough scale and needed to leave those investments for later, just gives us an opportunity to continue this improved performance in 2014 into 2015..

At this time I show no further questions. I would now like to turn the call back over to Mr. Fernandez..

Let me again thank everyone for participating in our third quarter earnings calla and we look forward to updating you again when we report the fourth quarter and summarize the entire year for you. Thank you again for participating in our call..

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