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

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

Welcome to The Hackett Group First 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. Mr. Ramirez, you may begin..

Good afternoon, everyone. And thank you for joining us to discuss The Hackett Group's first 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 4:31 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 I 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 maybe 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, and let me welcome everyone to our first quarter earnings call. As we customarily do, I will start the call by providing some overview or highlight comments of the quarter. I will turn it back to Rob and ask him to comment on detailed operating results, cash flow and also outlook.

Rob will then it back over to me, so that I can make some comments relative to market conditions and strategy. And then we will open it up for Q&A. So, again, let me welcome everyone to our first quarter earnings call.

This afternoon we reported revenues of $61 million, up 11%, 14% on a constant currency basis and pro forma earnings per share of $0.16, up 100%, both revenue and earnings per share were above the high end of our guidance. Improved results in Europe and stronger than expected U.S.

momentum drove our results, with 83% of our earnings per share improvement coming from improved operations, with the remaining 17% coming from lower global tax rates. Revenue in North America was up 11%, with both Hackett and ERP up nicely, and a specifically strong performance from our EPM Group.

Our IP wedge offerings, benchmarking and best practice advisory were up 20%, and strongly positioned and differentiated our business transformation and EPM practices which were also up nicely. European performance also improved growing 10% in spite a very strong foreign exchange headwinds.

Our ability to engage clients strategically with our benchmarking and best practice advisory offerings continues to expand. More importantly, our ability to use this intellectual capital to help configure software or organized most effectively is resulting an increased downstream opportunities for our transformation and EPM Consulting Group.

This is noticeable in our ability to compete for business as well in our improved gross margins throughout our business. To further highlight our IP leverage, our SAP Group was recently recognized as the Global Pinnacle Award winner by SAP, one of the most significant awards that a service provider can receive.

We have previously mentioned that our Oracle EPM Group was recognized as the EPM North America Influence Partner of the Year and that for second straight year.

Given our scale, we are certain that our ability to use our IP to highlight how -- how to optimally configure software and to also make these organizational recommendations directly contributed to these significant awards.

On the balance sheet side, the Board recently approved to further increase our annual dividend from $0.14 to $0.20 effective this fiscal year. This will now represent a 66% increase over the amount that we paid in 2014. Consistent with our year end comment, the dividend will be paid on a semiannual basis.

The increase reflects 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 will continue to invest in the expansion of our capabilities in Europe. We believe by more closely mirroring our U.S.

capabilities in Europe, we can improve our ability to grow in that region and also further strengthen our global delivery capability, which are important for large multi-national engagements. Additionally, we continue to develop and attract talent and expand our brand by continuing to build our proprietary best practices intellectual property.

We also continue to look for ways to leverage our IP to help differentiate, support our -- the sale and delivery of our offerings. As I mentioned previously, we are seeing that this improvement -- the improvement of this leverage throughout our business.

What is clearly different is that we now see the potential to leverage this IP through new external channels. I will comment about these opportunities in more detail in my strategic overview section of our call. I will also comment further on the market conditions and specific go-to-market initiatives.

But first let me ask Rob to provide details of our operating results, cash flow and also comment on outlook.

Rob?.

Thank you, Ted. As I typically do, I'll cover the following topics during our call; an overview of our 2015 first quarter results, along with an overview of related key operating statistics.

I'll also cover an overview of our cash flow activities during the quarter and I'll conclude with the discussion on our financial outlook for the second quarter of 2015. For purposes of this call, any references to The Hackett Group will specifically exclude ERP Solutions.

Correspondingly, I'll 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 revenues including reimbursable expenses.

Additionally, references to pro forma results specifically exclude non-cash stock compensation expense, intangible asset, amortization expense, acquisition-related charges and gains, restructuring charges, and assumes a normalized 30% tax rate.

For the first quarter of 2015, total company gross revenues were approximately $61 million and above our first quarter’s guidance. This represents year-over-year growth of 11% or 14% when adjusting for constant currency.

Total company international gross revenues accounted for 18% or 20% in constant currency of total company revenues in the first quarter of 2015, as compared to 18% in the first quarter of 2014. Total international revenues primarily derived from Europe were up by 10% on a year-over-year basis, primarily due to a weak prior year comparable base.

Gross revenues for the Hackett Group which excludes ERP Solutions were $51.6 million in the first quarter of 2015, an increase of approximately 12% on a year-over-year basis.

Hackett Group annualized gross revenue per professional was $374,000 in the first quarter of 2015 as compared to $336,000 in the first quarter of 2014 and $342,000 in the previous quarter.

Gross revenues from our ERP Solutions Group, which consists of our SAP Reseller, Consulting and Application Management -- Managed Services Group totaled $9.4 million, up 7% on a year-over-year basis. ERP Solutions hourly gross realized billing rate per hour was $142 in the first quarter of 2015 as compared to $127 in the first quarter of 2014.

This includes the impact of our offshore resources which approximately 42% of our ERP implementation resources. ERP Solutions consultant utilization was 72% for the first quarter of 2015 as compared to 76% in the prior year.

As we discussed throughout the previous year, our acquisition of the EPM AMS group in 2014 along with expanded growth in our SAP AMS offerings has continued to increase the portion of our total Hackett revenues that relate to AMS.

These services are provided to clients on an annual contracts and continue to grow the pace that is in excess of 25% on a year-over-year basis.

Total company pro forma cost of sales, excluding reimbursable expenses and stock compensation expense, totaled $33.6 million or 61.3% of net revenues as compared to $32.6 million or 66% of net revenues in the previous year.

Total company consultant headcount was 778 at the end of the first quarter of 2015 as compared to 762 in the previous quarter and 770 at the end of the first quarter of 2014. Total company pro forma gross margin was 38.7% of net revenues in the first quarter of 2015 as compared to 34% in the first quarter of 2014, a 470 basis point improvement.

Hackett Group pro forma gross margins on net revenues was 39% in first quarter of 2015 as compared to 34% in the first quarter of the previous year, primarily due to improved leverage from increasing revenues.

ERP Solutions pro forma gross margins on net revenues was 36% in the first quarter of 2015 as compared to 32% in the previous year led by improved revenue growth and higher margins from our AMS businesses.

Pro forma SG&A was $14.3 million or 26% of net revenues in the first quarter of 2015 as compared to $12.9 million or 26.1% of net revenue in previous year. This increase in SG&A is primarily due to incremental cost relative to incentive compensation accruals and higher selling related expenses resulting from improved company performance.

For the first quarter of 2015, interest expense on borrowings under our credit facility was $140,000 as compared to $124,000 in the first quarter of 2014, resulting from higher average debt balance from the current year.

Total company pro forma net income for the first quarter of 2015 totaled $4.8 million or $0.16 per diluted share, which was above our first quarter's guidance. Earnings per share in the quarter was negatively impacted by approximately $0.01 due to the impact of foreign currency fluctuations.

This compares to pro forma net income of $2.3 million or $0.08 per diluted share in the first quarter of 2014. Excluding the benefit from a lower normalized tax rate, pro forma EPS was up 83% when compared to last year.

Total company pro forma net income for the first quarter of 2015 excludes non-acquisition stock compensation expense of $1.6 million, acquisition-related stock compensation expense of $274,000 and intangible asset amortization expense of $547,000. Pro forma results also assumes a normalized tax rate of 30% or $2.1 million.

Pro forma EBITDA in the first quarter of 2015 was $7.6 million or 14% of net revenues as compared to $4.5 million or 9% of net revenues in the first quarter of 2014, an increase of 68%. GAAP diluted earnings per share was $0.10 for the first quarter of 2015 as compared to GAAP diluted earnings per share of $0.01 in the first quarter of 2014.

At the end of the first quarter of 2015, the company had approximately $60 million of income tax loss carry forwards remaining in the United States relating to both state and federal purposes and approximately $10 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 in the near future. The company's cash balances were $10.8 million at the end of the first quarter of 2015 as compared to $14.6 million at the end of the previous quarter.

This decrease in the first quarter was primarily attributable to net cash used from operations, capital expenditures and cash utilized through repurchase common stock.

Net cash utilized by operating activities in the first quarter of 2015 was $2.4 million, which was primarily driven by net income, adjusted for non-cash items amounting to $6.4 million offset by decreases in accrued expenses, primarily relating to the payout of 2014 performance bonuses, decreases in accounts payable due to the timing of maintenance payments relating to our AMS business and an increase in accounts receivable, resulting from an increase in revenue and an increase in our DSO.

Our DSO or day sales outstanding at the end of the first quarter of 2015 was 63 days as compared to 61 days at the end of the fourth quarter of 2014. At the end of the first quarter, the company had $18.3 million of borrowings outstanding. Given our cash balances, this represents a net debt position of less than $7.4 million.

During the quarter, we purchased 75,000 shares of the company stock at a total cost of approximately $653,000 or an average cost of $8.70 per share. Our remaining stock repurchase authorization at the end of the quarter is approximately 3 million.

As a result of stock repurchases, subsequent to quarter end, our current buyback authorization now stands at approximately 2.3 million. I’m now going to discuss our guidance for the second quarter.

We expect total company gross revenues for the second quarter of 2015 to be in the range of $61 million to $63 million, with a reimbursable expense estimate of 11% on net revenues. On a total company basis, we expect revenues to be up to 2% to 3%, or 5% to 6% on a constant currency basis.

Unfavorable FX will also impact pro forma earnings per share by at least one penny. We expect Hackett to be up 8% to 10%, with U.S. revenue growth stronger than revenue growth in our international business. We expect our ERP Solutions group to be down 15% to 20%, due to strong SAP software sales in the second quarter of 2014.

Assuming comparable year-over-year software sales, ERP solutions would be up in excess of 10%. As such, we expect our pro forma diluted earnings per share in the second quarter of 2015 to be in the range of $0.16 to $0.18.

Our pro forma guidance excludes amortization expense, total non-cash stock compensation expense and includes a normalized tax rate of 30%.

As a result of our revenue guidance, we expect pro forma gross margin on net revenues to be approximately 38% to 39% in the second quarter, with Hackett margins expected to increase by 400 to 500 basis points and ERP decreasing from 52% to approximately 36%, reflecting the large software sales in Q2 of the previous year.

We expect pro forma SG&A and interest expense for the second quarter to be approximately $14.4 million or flat sequentially. We expect SG&A to decrease as a percentage of net revenues, as a result of continued leverage on revenue growth when compared to the previous year.

We expect the second quarter pro forma EBITDA on net revenues to be in the range of approximately 14% to 16%. We expect our cash balances excluding the impact of any debt repayments or share buyback activity to be on a sequential basis.

At this point, I’d 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, consistent with last quarter, 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 offerings abroad even if it comes with more volatile decisions, with a more volatile decision-making environment when compared to the U.S. One of the key driver for our growth in the U.S.

has been the focus on growing our wedge offerings, which include our Benchmarking and Executive Advisory services, which we accomplished by expanding our dedicated sales channel as well as our offering.

Both of these offerings are highly differentiated in the marketplace and as I mentioned, collectively grew over 20% in the quarter and provide significant cross-selling leverage for all of our other offerings. Another key driver of our growth strategy has been to continue to expand our market-leading Enterprise Performance Management business.

EPM now represents approximately 47% of our North American Hackett revenues. So, why are we having success competing with much larger competitors? We believe we've assembled a terrific team.

But what uniquely differentiates Hackett is our ability to leverage our best practice, configuration and organizational insight that emanates from our Benchmarking and Advisory business.

Our empirically-based message helps our software partners to be successful in positioning there business value of their software, when their product is optimally configured, targeting the appropriate information and also by taking advantage of our best practice insights to organize their business most effectively.

Additionally, our increased focus on application managed services, which was highlighted with the addition of our EPM, AMS services group in early 2014, has also provided us with both the opportunity to serve clients after they go live in both Oracle and SAP groups.

This extension of capability in this area and the ability to leverage the highly trained offshore resources, effectively have strengthened our implementation teams as well. Our focus on AMS, which is part of both, our Oracle EPM and SAP practices has also provided us with a growing level of recurring revenue at very strong margins.

Our long-term strategy is to continue to build our brand by building new offerings and capabilities around our unmatched best practices intellectual capital in order to serve clients strategically and whenever possible continuously. We believe the clients that leverage our IP are more likely to allow us to serve them more broadly.

IP-based services enhanced 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 channels to further use and to further use that entry point to introduce our business transformation and technology consulting as well as our AMS capabilities.

Specific to new alliances and channels, we are now seeing new opportunities to use our IP, not only to enable us to differentiate our offerings, but we now believe we can use our IP to help others sell and deliver theirs as well. We recently announced a new collaboration with CIMA, the Chartered Institute of Management Accountants.

We believe this relationship will allow us to build an entirely new business in the professional development and talent management areas. This is a significant opportunity and we plan to provide you with more details as our new relationship is better defined.

On the Hackett Performance Exchange, or HPE front, we continue to build our pipeline and explore alliances that can use us, that allow us to expand the sale of this unique offering. We also hope to be able to identify and announce other opportunities that will leverage our best practices, IP in entirely new way as the year unfolds.

This strategy will allow us to increase our client base, profitability and increase revenue per client. It would also represent increasing revenue, recurring revenue at higher margins due to the way these services are provided as well as contracted.

The best example of this strategy continues to be the revenue leverage we have experienced from our executive advisory base.

Specific to that 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 programs and eventually through new offerings like the Hackett Performance Exchange and some of the new ventures that were explored.

At the end of the quarter, our executive advisory members totaled 950 across 295 clients. In the quarter over 40% of our Hackett sales were also advisory clients, which continue to support the leverage of this entry or IP wedge offering.

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

We are also optimistic that the improvements and investments we are making in our IP, in our sales channel, and in our expanded AMS focus will continue to lead to improving results.

More importantly, I believe that we have never been in a better position strategically, the unique value of our IP and the potential it offers when coupled with our terrific talent and improving execution are strong proof points.

As always, let me close by thanking our associates for their tireless efforts and as always urge them to stay highly focused on our clients, our people and the exciting opportunities available to our organization. These conclude my comments. Let me turn it back over to you, Operator, and we can start our Q&A..

[Operator Instructions] Our first question here comes from Morris Ajzenman. Your line is now open..

Hey, Ted, Rob..

Hey, Morris..

Hey, Morris..

On the CIMA thing, I know you can’t say too much, but nonetheless, what are your share cost until those things up and running and when do you think it will be up and running this offering?.

Well, I think if things go according to plan, our goal is to have to a fully defined strategy with CIMA by sometime in the fall. Again, if it goes according to plan, this will allow us to develop a complete suite of professional development and training programs for individuals, who reside in shared service or global business service centers.

We think that addressable market is approximately $5 million. And if we were able to jointly capture some of that, that a group of students that needed our training and hopefully our certification, which is the goal, is to become the certifying standard for those individuals at work in those environments, we could build a very substantial business.

We are early in those conversations. We have been working with them for several months to develop the overall opportunity.

There is the process that’s required to develop these programs and to also approve to get the necessary approval and certification that would only make these programs, training programs more valuable and really encourage those who take our programs to stay with us on a continuous basis. So, that’s what we are working on.

So we think it’s a meaningful opportunity.

So specifically answer your question, the beautiful part about that opportunity is this is an organization who reached out to us, because they believe that launching these training programs is critical to the changing work environment as the transition of those employees that are moving from functional corporate groups into these large shared service centers and global business centers.

And our hope is to try to build an equipment business to the one they built in trying to provide training and testing and certification for management accounts the way they do globally. And if we do that, then this will be a huge success.

More importantly, they came to us because they believe that the intellectual capital, the detailed information required to know what individuals do in those large centers across all of the back-office functions resides uniquely with Hackett and then the access and credibility of those individuals to recede that kind of information, whether it’s the development guys and the ultimate training and tests that they would receive to know that they are getting that from information that is provided by Hackett and continuously updated by Hackett.

And their minds made this a very meaningful collaboration. So stay tuned. It would be the best that I could tell you..

And on the alliances, which is HPE, is it your hope to have an announcement sometimes in 2015 as it relates to an alliance?.

Well, we are hoping because we have been working really now for nearly a year to find a software alliance partner for HPE. So we continue to work on that diligently, as well as we continue to work and discuss how other software companies can leverage our IP to strengthen their go-to market.

So as I mentioned in the first quarter, we would expect to have some of these things, some of these proof points unfold during 2015 and we continue to believe that..

One last question and I’ll get back in queue. ERP utilization rate year-over-year dropped from 76% to 72%, yet the gross billing rate per hour was up 11.8%, $127 to $142.

Just kind of talk to me about how should we see that play out in the future?.

Well, I really can vary significantly by the type of engagements we take on the scale. If you’re getting -- sometimes if you’re getting smaller engagements, you’re able to yield a higher rate. It also depends on the mix, the offshore to onshore mix. So those things can impact the utilization, as well as the rate per hour in the SAP Group.

So one thing that I can tell you is that that group’s profitability continues to improve.

The AMS or recurring revenue portion, which actually comes at a higher gross margins that are implementation business for SAP, also has continued to grow and it just bodes well for the continuing improvement that we speak to an envision for the remainder of 2015..

Thank you..

Thank you. And our next question comes from Mr. George Sutton. Your line is now open, sir..

Thank you. Ted, I wanted to focus my questions on Europe if we could. Europe, we really saw the first improvement we’ve seen in a while and you did reference some easy comps.

I’m wondering if there is something more to the strength you saw in Europe this quarter?.

Well, look I mean, we clearly improved the operating performance in Europe throughout all of 2014 and into the first quarter. So when we look at where we were a year go to the day in total, our performance as well as reducing the operating cost as we did a year ago have benefited our overall European results.

Look, we think the environment has really not changed much but we never complained about the activity in Europe really being weak. We just know that it can be volatile, things that can be in the pipeline. European tend to remake things and on as proactive as the clients that we normally interact with here in the U.S.

and sometimes that has impacted our performance. But all in all, our execution has improved, the growth did improve. By the way, the comps were favorable but I also want you to know, they were hammered.

Our results were hammered by the significant FX changes relative to euro on pound, which are the two primary currencies that we do business within Europe. So, look overall year-over-year Europe has made improvement and our hope is that it continues to do that.

But as we have said to our investors and we’ve shared with you, George, over the last 12 months, we’ll plan Europe cautiously and make sure that we don't expect them to outperform until we see the result actually realized. And we’ll continue to really ride the very strong U.S. demand and momentum that we've been experiencing now for sometime.

And also its not only improved momentum, I mean, you’re seeing not only that momentum improved but I mean -- I hope it wasn’t miss that the strong gross margin, the 470 basis point improvement in gross margin and the 400 to 500 basis point improvement that we expect in the Hackett related business on a year-over-year basis to continue to Q2.

So I mean, it’s improved execution, strong U.S. demand and stable to improving Europe results..

So you mentioned you were playing to expand capabilities in Europe.

I wondered if you could be more specific there?.

Well, we want to continue to invest in EPM. We started a year ago by bringing in an EPM, overall leader that had EPM capabilities. We move people from the U.S. to Europe. We’ve been hiring people in the EPM state. And we want to continue to do that in Europe.

And we also started seeing some demand and made some investment, had some multinational engagement last year in the procurement space. And so we’re going to look, we’re going to look to continue to invest in Europe across these areas where we know we’re having great success in the U.S. throughout 2015. We will do that judiciously.

We will do that carefully but we will continue to invest in Europe..

Lastly for me, I’m not sure if its congratulations or I’m just look -- going down memory lane with respect to the executive advisory base. I can't remember what the initial goals you had or the number of customers or the number of programs. But 295 and 950 sounds almost like a milestone and I just wanted to get the relevant numbers from you..

Not yet, not yet. My initial goals were 500 clients and 1,000 members. So we’re approaching it on the member side, but we still have a ways to go on the client side. Let see, if some of the new vendors and initiative we’re working with will help of it some of that, George, as we -- as 2015 unfold..

Okay. Appreciate the help..

Thank you. [Operator Instructions] Our next question comes from Mr. Bill Sutherland. Your line is now open..

Thanks very much. So, Ted, the revenue per professional was up very nicely 11%.

Wanted just to get your thoughts -- some color on that please?.

Well, I’ve got to tell you, all of our practice leaders are just really doing a better job in not only competing for business, but also what I’ll call resource management in every aspect of business.

Our COO, David Dungan works closely with all of them and I can tell you that at the beginning of 2014 we made a statement that we would improve our execution across all dimension and that was a combination of revenue growth and also building out our pyramid a little bit more efficiently.

What you are seeing is a manifestation of all those efforts, improved go-to-market execution by leveraging the IP -- the unique strengths of Hackett, so our ability to compete for business. I think the confidence from our channel partners is improving.

I mean, they know that they can take us to market when they have a client that’s really I’ll call it doesn’t fully realize the value of their software and that we can use our IP to help them respond to some of those questions just very, very credibly and that helps us the downstream revenue and just day-to-day blocking and tackling.

But it’s a combination of those things that we’ve really been talking for a while and they all just continue to be -- they continue to come together. It always helps to have improving demand and that activity in the U.S. and our ability to compete. I mean all of these things are just working very well for us.

Not to say we are anywhere near firing on all cylinders, but clearly year-over-year improvement. And even when you look at year-over-year guidance, our execution is just significantly better. I mean a lot of people are using FX headwind to talk about revising guidance downward.

I mean everything we’ve done since the beginning of 2014, in spite of FX, which is significant, if you’ve got a European operation the way we do. I mean we are just powering through that we are very proud of it..

So it’s not necessarily rates or utilization. But which is having a more prominent impact on the….

No, no. We are definite -- I would say its utilization without a doubt. I can't say that, I mean, we are seeing in some areas improving rates and I think that's when we position IP and our total value to proposition a little bit better than just tactical execution of a project. So I would say that there is a little bit of that.

But it’s just -- its revenue growth and just a smarter resource planning and targeting an improved pyramid, the combination of those three things. So it is utilization, its win and it’s managing our average COS more effectively as well..

No. You all don’t provide a utilization number for The Hackett side and what's, I mean, do you want to tell us kind of where you run there or is that....

We really don’t and the part of the reason we don’t and talk about revenue per professional is because of the way some of our people can migrate and assist with some of the areas that are not rate based like our benchmarking and executive advisory offerings, which are purely, if you want to call factory based, where people even some of the groups can move in and out to assist in the delivery of those..

Right..

But I would say that, we’ve improved it. But similar to our pyramid, it would not be at the levels that you would hear are largest competitors boost or speak to. So we still have gross margin opportunity..

Okay. Just a couple of housekeeping items for me.

The quarterly billable days, is that worth -- Rob, is that worth tracking for the quarters?.

We usually talk about it when it’s material..

Okay.

So they are roughly even this year?.

No, we even on the year-over-year basis..

Correct. Year-over-year, it’s sequential where you will have an impact..

That's a highest in Q1 right than your vacations start to kick in a little bit more as you get into that latter part of Q2..

Right..

You then have significant vacation in Europe in Q3 and obviously some in the U.S. And then you have the holiday period in Q4, in the Q4 period..

Remember this year Bill the impact wasn’t as great as it’s in prior years because we have that extra week in Q4 of 2014..

So you are comping against, you do have one last week this year?.

On a fiscal year basis..

Correct..

Right, but in terms of your reported, that’s Q4 number?.

I mean, in reported FQ4 number..

You’ll be down one week..

Yes, because -- yes, we will this year, but this year what we find out is that when you are in that last week, it was a breakeven, that additional week was a breakeven for us..

I can imagine..

So I’d love to say that it created an advantage in Q4 or that it disadvantages us -- it disadvantages us slightly on revenue on a Q4 to Q4 fiscal year basis, but it does not disadvantage us on our profitability basis, on a full fiscal year basis..

Okay.

And then last Rob roughly what are the non-cash items that you are assuming in your pro forma gross margin SG&A?.

Sorry, your non-cash stock-compensation expense..

That's the main ones, yes..

That's going to be the big in the current quarter..

And just kind of is that just kind of last year’s number I mean, I just -- if it’s -- for the first quarter, it was quite different?.

Are you specifically talking gross margin gross, gross margin was really non-cash stock-compensation expense..

Yes.

And I am just saying in the first quarter it was quite a bit higher than typical and particularly when you included the acquisition related comp, I am just asking kind of what kind of number to plug in there, that's all for Q2?.

I would assume this current run rate at this juncture, Bill..

Say it again..

I would assume this current run rate at this juncture..

So with the acquisition comp, it was $1.3 million right, the first quarter?.

Right. That's correct..

Okay.

And the same for all the quarters this year?.

Yes..

All right. Interesting. Thank you, gentlemen. Good quarter. Thanks..

Thanks, Bill..

Thank you. And our next question comes from Mr. Jeff Martin. Your line is now open, sir..

Thanks. Good afternoon. Ted, could you characterize? I know you’ve said the decision making environment in Europe is volatile. You said that for a couple quarters now.

How would you characterize the decision making environment in North America?.

We think it’s solid. We think it’s been unchanged. In fact, we didn’t think it was -- even when we had that negative GDP quarter at the beginning of 2014, I really do believe that people really either blame that on weather, but they did not change anyone’s prospects or the business plans in anyway. So no, we are expecting the U.S.

activity to remain solid. And we expect decision making to be consistent with what I will call North American based culture. It will be proactive unless you have some meaningful disruptions for them to change other way..

Okay.

And then with the AMS side of the business growing 25%, it would be helpful to know what ballpark the revenue basis on that?.

I think what was that Rob that we provided? What’s the annualized contract value? Okay, it’s $16 million to $17 million, Rob said..

Okay..

And that’s probably would be pretty equally split between SAP and [indiscernible] Groups, yes..

And you mentioned it’s got stronger margin.

Are we talking several basis points stronger or even more than that?.

Yes. There were in the 45% to 50% area. They are now very good..

Okay. And then, can you help characterize what typical software sales are on the ERP side of the business? You have a tough comp in the second quarter.

It would be helpful to know if there is a general level on a quarterly basis or an annualized basis, what that number is?.

I’d say on an annual basis, they are normally run about $3 million. But last year, they were higher than that because of the activity we experienced in Q4.

So typically, you're saying about -- if they were perfectly -- if they all fell across perfectly, which they never do, you are having some number between $500,000 and a $1 million of reseller, if you want to call it revenue for us but it varies per quarter. .

Okay..

This is per quarter. Last year, we just had -- we actually got off to a pretty bad start. If you go back and look at the SAP sales for that previous two or three quarters, comps for SAP were kind of weak and they were being affected by lower reseller sales.

And we saw that reseller activity really spike up in Q2 and stay pretty nice, not at the Q2 levels but stay strong through Q3 and Q4 of last year. So, we are almost making up for some, if you want to call it not too good of a previous 12 months period before we hit second quarter of last year.

So it was total and then we had one significant deal as well..

Got it.

And then last question is on CIMA, you referred the 5 million addressable market, I assume that’s 5 million people?.

5 million people. We think that CIMA and Hackett could pursue together. And if you were able to get a [participant], you then decide what kind of penetration rate you think you could have. We obviously have plans for those things, if we are able to get everything done then we would like to during 2015.

But I will wait for some of that to develop before I get a little bit ahead of myself. But suffice to say that if we are able to put together the kind of vision that we're working towards, there is a very substantial opportunity available to us and CIMA..

Okay. And then help us to understand, once you kind of get the strategy formulated and the types of training programs you're going to develop.

In terms of the go-to market strategy, what kind of timeline is a reasonable expectation to introduce that and then eventually start signing people upon?.

We believe that we actually have one offering that they had developed that we’ve been -- I’ll say it, rewriting or improving along with them. That is going to be -- that is ready and should be ready to go to market sometime this summer. That will be an entry-level program, but we're hoping to develop something much more comprehensive and more broadly.

But we need to make sure that we have other things in place that will allow us to move from a vision to full certification capability, which is really then creates -- it allows us to play a very strong hand and will allow us to pursue a certain, if you want to call it peace of that addressable market very aggressively.

But look, if that venture -- given the opportunity available and the fact that our primary contribution is intellectual capital and secondarily is sales support, if that business was to get off the ground in 2016 and build any kind of something any -- if you wan to call it 0 to 5 million or 0 to something greater I don’t know.

And we were sharing that with CIMA because of the operating margins in that business. Look, it could be nicely accretive to us in ‘16 and if we were able to get all that done this year..

And I would assume those are IP-type margins?.

They would be IP-type margins. Our contributions would be entirely IP, or the review of the content and the courses and the test and all that with existing people. So, we would expect a significant -- it would be IP-type margins or operating margins.

They would be significantly -- we would be targeting significantly higher operating margins than we do in our current business..

Sure. Okay. Sounds great. Thanks Ted..

All right. Thanks..

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

Thank you. Let me thank everyone again for participating in our first quarter earnings call. We look forward to updating you again once we closed the second quarter. Thanks again for participating..

Thank you for participating in today's conference call..