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

George Sutton – Craig-Hallum Morris Ajzenman – Griffin Securities.

Welcome to the Hackett Group Second 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..

Thank you, operator. Good afternoon, everyone. And thank you for joining us to discuss The Hackett Group's second 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, Chief Financial Officer.

A press announcement was released over the wires at 4:33 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 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. As we customarily do, I will start the call by providing some overview or highlight comments on the quarter. I will then turn it back over to Rob and ask him to comment on operating results, cash flow and also on guidance. Rob will then it back over to me, so that we can cover some market or strategic overview comments.

And then we will open it up for Q&A. So let me start with the quarterly highlights first. And first let me welcome everyone to our second quarter earnings call. This was another very strong quarter.

This afternoon, we’ve reported revenues of $66.4 million, up 9%, 11% on a constant currency basis and pro forma earnings per share of $0.19, up 19% both above the high end of the guidance. Stronger than expected U.S. momentum drove our results across virtually all of our U.S. practices.

Our results were in spite of the unfavorable impact from FX which reduced our revenues by more than 2% and pro forma earnings per share by $0.01. Revenue in North America was up 9%, with all Hackett Group practices up nicely and specifically strong performance from our EPM group.

Excluding our ERP group, which was down 13% as a result of a tough comp due to large software sales in 2014. Our North American business grew over 15%. European performance was also improved growing at 9% in spite of the strong FX wins I have previously mentioned.

Our ability to engage clients strategically beyond our benchmarking in best practice advisory offerings continues to expand.

Our transformation clients are acknowledging our broader capabilities and are requesting that we assist with performance improvements beyond the selling and general administrative areas and into operations which increased in deal side.

On the EPM or enterprise performance management side growing market and channel credibility as well as awareness of our broader capabilities is also driving an increase in both the volume and the size of our opportunities.

In fact, just today we were inform that we’ve been recognized as the number one influence partner in EPM or enterprise performance management for Oracle for the third year in a row as I’ve mentioned in previous years when you consider some of our much larger competitors in the space this is truly a significant recognition.

So broadly speaking our IP leverage and our growing credibility in channel awareness are driving our growth. The further highlight our unique IP leverage this quarter I would like to highlight the alliance agreement that we have recently announced.

First, let me start with HPE or the Hackett Performance Exchange that along with Oracle will now be sold as – will be sold along with Oracle’s business intelligence cloud service.

Number two, our collaboration with CIMA, the Chartered Institute of Management Accountants to develop a suite of global certification programs for shared services and GBS professionals.

And our most recent announcement with ADP that will now include a dedicated best practice advisory program in support of the sale implementation and strategic post implementation support of their Vantage HCM offering.

It is impressive that the significant organizations believe in our proprietary benchmarking and best practice implementation inside can influence the sale and value proposition of their offerings. On the balance sheet on July 10, we paid $0.10 semi-annual dividend on an annual basis this represents a 66% increase of the amount we paid just in 2014.

This increase reflects our desire to reward shareholders that our long-term holders of our stock as part of our overall strategy to return capital to shareholders. On the investment front, and even yet, even though we have yet to see our desired results in Europe we continue to invest and expanding those capabilities.

We continue to believe that 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 capabilities which are important for large multi-national engagements.

We also continue to develop and attract talent and expand our brand by continuing to build our proprietary best practice intellectual property. Not only what we have, how we deliver it, how our client can see it and now how channel partners will have access to it, is all being improved.

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

But what is clearly different is that we’re now also seeing the potential leverage to take this IP to new external channels as we have highlighted with our recently announced alliances. I will comment about these opportunities in more detail in my strategic overview section of our call. I will also comment further on market conditions.

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

Rob?.

Thank you, Ted and welcome everyone. As I typically do, I’ll cover the following topics during this portion of our call. An overview of our 2015 second quarter results, along with an overview of related key operating statistics.

I’ll provide an overview of our cash flow activities during the quarter and I’ll then conclude with the discussion on our financial outlook for the third 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.

In terms of our second quarter results, for the second quarter of 2015, total company gross revenues were approximately $66.4 million and above our second quarter’s guidance. This represents year-over-year growth of 9% or 11% when adjusting for constant currency.

Gross revenues for The Hackett Group which excludes ERP Solutions were $56 million in the second quarter of 2015, an increase of 14% on a year-over-year basis. Hackett Group annualized gross revenue per professional was $397,000 in the second quarter of 2015 as compared to $359,000 in the second quarter of 2014 and $374,000 in the previous quarter.

Gross revenue from our ERP Solutions Group, which consists of our SAP Reseller, consulting and application managed services groups’ totaled $10.4 million, were down 13% on a year-over-year basis due to the significant software sale in the second quarter of the prior year. On a normalized basis, the ERP group grew over 13% on a year-over-year basis.

ERP Solutions hourly gross realized billing rate per hour was $136 in the second quarter of 2015, as compared to $125 in the second quarter of 2014. This includes the impact of our offshore resources which approximately 40% of our ERP implementation group.

ERP Solutions consultant utilization was 77% for the second quarter of 2015, as compared to 75% in the second quarter of 2014. 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 recurring revenues that relate to AMS.

These services are provided to clients on an annual contracts and continue to grow at a pace that is in excess of 22% on a year-over-year basis. Total company international gross revenues accounted for 16% or 18% in constant currency of total company revenues in the second quarter of 2015, as compared to 16% in the second 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.

Total company pro forma cost of sales, excluding reimbursable expenses, acquisition related expenses and stock compensation expense, totaled $36.4 million or 61.3% of net revenues as compared to $33.6 million or 61% of net revenues in the previous year.

Total company consultant headcount was 810 at the end of the second quarter of 2015, as compared to 778 in the previous quarter and 774 at the end of the second quarter of 2014. Total company pro forma gross margin was 38.7% of net revenues in the second quarter of 2015, as compared to 39% in the second quarter of the previous year.

As discussed in Q2 of last year, we had a significant software sales transaction in our ERP business, assuming normalized reseller revenues to prior year gross margin would have been 35.7% as compared to the current quarter’s gross margin of 39%.

This comparison to this normalized gross margin better reflects the margin improvements achieved over the last 12 months, tampered by the increased use of subcontractors due to increased demand. This improvement is expected to continue as we moving to Q3.

Hackett Group pro forma gross margins and net revenues was 38.9% in the second quarter of 2015, as compared to 35.8% in the second quarter of 2014. A 310 basis points improvement which is primarily due to improved leverage from an increasing revenues as well as improved resourcing model actions taken over the last 12 months.

ERP solutions pro forma gross margins on net revenues was 37.8% in the second quarter of 2015 as compared to 51.8% in the previous year. As discussed the second quarter of 2014 had exceptionally strong SAP reseller activity which drove a higher gross margin in the previous year.

On a normalized basis assuming comparable reseller sales activity, the comparable prior margin would have been 34.9% as compared to the current quarter’s 37.8%. The primary reason for year-over-year improvements in our ERP gross margins are driven by the growth and margins of our SAP AMS business.

Pro forma SG&A was $14.7 million or 24.7% of net revenues in the second quarter of 2015 as compared to $14.3 million or 26.1% of net revenues in the previous year. This increase in SG&A is primarily due to incremental costs relative to incentive compensation accruals and higher selling related expenses resulted from improved company performance.

Total company pro forma net income for the second quarter of 2015, totaled $5.8 million or $0.19 per diluted share, which exceeded our second 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 $4.7 million or $0.16 per diluted share in the second quarter of 2014. Excluding the benefit from a normal – lower normalized tax rate pro forma EPS was up 15% when compared to the prior year.

Total company pro forma net income for the second quarter of 2015, excludes non-acquisition stock compensation expense of $1.6 million, acquisition related stock compensation expense of $152,000 and intangible amortization expense of $547,000. Pro forma results also assumes normalized tax rate of 30% or $2.5 million.

Pro forma EBITDA in the second quarter of 2015 was $9 million or 15% of net revenues as compared to $7.7 million or 14% of net revenues in the second quarter of 2014, an increase of 17%.

GAAP diluted earnings per share was 12% for the second quarter of 2015, as compared to GAAP diluted earnings per share of $0.09 in the second quarter of the previous year. At the end of the second quarter of 2015, the company had approximately $9 million of income tax loss carry forwards remaining in the U.S.

relating to both state and federal purposes and approximately $9 million in foreign tax jurisdictions respectively. At our current run rate we expect, to fully utilize our U.S. federal net operating losses sometime before the end of fiscal year 2015.

We will continue to have the ability to offset most of our international tax liabilities throughout 2016. The company’s cash balances were $16.2 million at the end of the second quarter of 2015, as compared to $10.8 million at the end of our previous quarter.

This cash increase in the second quarter was primarily attributable to net cash provided from operations, offset by capital expenditures and cash utilized through repurchased common stock.

Net cash provided by operating activities in the second quarter of 2015 was $7 million, which was primarily driven by net income, adjusted for non-cash items which totaled $8.8 million, offset by an increase in accounts receivable of $2.5 million resulting from an increase in revenues.

Our DSO or Day Sales Outstanding at the end of the second quarter was 61 days as compared to 63 days at the end of the previous quarter. At the end of the second quarter, the company had $18.3 million of borrowings outstanding. Given our cash balances, this represents a net debt position of $2.1 million.

During the quarter, we purchased 74,000 shares of the company’s stock at a total cost of $703,000 or an average cost of $9.51 per share. Our remaining stock repurchase authorization at the end of the quarter is approximately $2.3 million.

Additionally, we have now reflected cash utilized through repurchase shares of the company’s common stock from employees to satisfy income tax we’re holding triggered by the vesting of restricted shares in financing activities on a cash flow statement.

We utilized $113,000 to repurchase 9,000 shares in the second quarter and have utilized $2.2 million to repurchase $276,000 on a year-to-date basis.

I will now turn to our guidance for the third quarter of 2015, consistent with our seasonal third quarter trends, we expect the impact of the additional U.S holiday and the typical increased indication utilized in both the U.S and Europe to unfavorably impact available days by approximately 4% to 5% on a sequential basis as we head into the third quarter.

We expect the total company gross revenues for the third quarter of 2015 to be in the range of $63.5 million to $65.5 million, with a reimbursable expense estimate of 11% on net revenues. On a total company basis, we expect revenues to be up to 6% to 8%, or 8% to 10% on a constant currency basis.

Unfavorable foreign currency movements will also impact pro forma EPS by at least $0.01 in the third quarter. We expect strong U.S revenue growth of approximately 15% with European revenues to be down approximately 25%. This European revenue decline includes the negative impact of foreign currency fluctuations of approximately 12%.

As such, we expect our pro forma diluted earnings per share in the third quarter of 2015 to be in the range of $0.17 to $0.19. Our pro forma guidance excludes amortization expense, total non-cash stock compensation expense and includes a normalized tax rate of 30%.

Sequentially, we expect the pro forma gross margins in the third quarter to benefit from the seasonal reductions in U.S payroll related taxes, resulting from reaching FICO limits and the utilizations of vacation accruals offset by decreasing available days due to summer vacations.

As a result of our revenue guidance, we expect pro forma gross margin on net revenues to be approximately 38% to 40% in the third quarter. We expect the pro forma SG&A and interest expense for the third quarter to be approximately $14.5 million were essentially flat on a sequential basis.

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 third 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 up 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 in the coming months..

Thank you, Rob. As we look forward, consistent with the last several quarters, we expect continued growth from our U.S. business across nearly all of our groups.

In Europe we do not expect our momentum to continuing to Q3, however we believe that the demand environment is stable even if it comes with more volatile decision making environment when we compare that to the U.S. We expect one of the key drivers of our growth in the U.S.

to continue to come from the growing leverage of our wedge or benchmarking an executive advisory offerings, which we have accomplished by expanding our dedicated sales channel and our offerings over the last couple of years.

Both of these offerings are highly differentiated in the marketplace, as I previously mentioned we’re now seeing the leverage of the increased entry point integrator number and size of opportunities which is contributing to the growth that we are seeing in the U.S.

Another key driver of our growth strategy has been to continue to expand our market leading EPM or enterprise performance management business. EPM now represents approximately 49% of our North American Hackett revenues.

We believe that the combination of assembling a terrific team and our unique ability to leverage our best practice configuration and organizational excellence IP that M&A from our benchmarking and advisory business is responsible for the success.

Our empirically based insight helps software partner be successful in positioning the business value of their software when their product is optimally configured. Targeting the appropriate information and also taking advantage of our best practice insights to organize their business most effectively.

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

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

Our long-term strategy is to continue to build our brand by building our new offerings and capabilities around our unmatched best practice intellectual capital in order to serve client 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 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 and to further use that entry point to introduce our business transformation, technology consulting as well as out AMS capabilities.

Specific to new alliances and channels we are now seeing new opportunities to use our IP to not only enable us to differentiate our offerings, but we now believe we can use our IP to help others, sell and deliver their offerings. In April we announced a new collaboration with CIMA, The Chartered Institute of Management Accountants.

We believe this relationship will allow us to build an entirely new professional development business that we hope will create a globally recognized certifications for shared services and global business service professionals.

We are started to share this new offering with clients and planned on [indiscernible] complete curriculum along with branding and related certifications of this partnership during this quarter.

On the Hackett Performance Exchange front, we recently announced our new joint marketing plan with Oracle that will include the sale of HPE, with the sale of their Oracle's Business Intelligence Cloud Service platform. We started train the Oracle sales force on this new offering and hope to see sales from this new effort as we exit the calendar year.

Lastly, last week we announced our new alliance with ADP which will add a dedicated Hackett best practice advisory program to ADP’s Vantage HCM solution.

This is an 18 month agreement with contractual dollar – with a contractual dollar guarantee, that will allow us to both see how best levered our best practices IP in the sales implementation and post implementation of support of their cloud-based offering. Our program will run concurrent with their multi-year contract with their clients.

By augmenting ADP Vantage HCM with industry best practices from The Hackett Group, ADP clients will enhance our ability to achieve business outcomes by better aligning the HR services with their business strategies.

ADP Vantage HCM clients will now have access to Vantage-specific best practice configuration guides and process flows; HR performance metrics and best practice Human Capital Management research; and also access to our Human Capital Management subject matter experts.

On IP leverage strategy, our IP leverage strategy should allow us to increase our client base, profitability and increase revenue per client. It should also represent an increasing – an increase in recurring revenue at higher margins due to the way these services are provided and contracted.

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

Specific to the executive advisory client base, we’ve said continuously our long-term goal is to be able to scribing increasing percentage of our total annual revenues to clients for continuously engaged with us through one of our executive advisory programs and eventually through our Hackett Performance Exchange.

At the end of the quarter, our executive advisory members totaled 940 across 300 clients. Consistent with prior quarters nearly 40% of our Hackett sales were also advisory clients would continues to support the leverage of this entry or IP wedge offering.

Lastly, even though we believe that 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 accelerate our growth. In summary, we reported another strong quarter.

More importantly, we are seeing that the improvement and investments we are making in our IP, and in our sales channel, in our expanded AMS focus will continue to lead to improving results.

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 our strong prove points.

As always, let me close by thanking our associates for their tireless efforts and always I’ll simply say 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 move the phone to Q&A..

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question coming from Mr. George Sutton from Craig-Hallum. Sir, your line is open..

Thank you, guys, congratulations on the results..

Thank you, George..

Thank you, George..

As we look at the breadth of your offerings, can you quantify the number of touch points you will now have versus what you might have had a year ago largely with your direct sales force. I’m not sure that the easy to answer question or not, but I wanted to get that sense..

Well. Let me take a shot at that, I mean obviously the thing – the most important thing we do is to put out insight that will allows us to market, our thoughts and research which gains and access to clients. But at the end of the day, as we know you’re limited to the number of people that actually call in clients and can selling offerings.

And one other things that we really like about some of these new ventures that we’re pursuing with some of these channels is that we think that by doing by having these new offerings and alliances with these significantly larger channels.

We’re going to have more people promoting the Hackett capability and our intellectual property to a larger group, significantly larger group than we would ever envision doing that our own. So not only have we broaden our capability George, and by growth adding people and therefore, touching more clients.

These new channels for us as they go to market and position Hackett and the Hackett insights to sell their offerings and to tell our story, we believe only enhance not only our ability to grow the services that we plan to offer with them or through them, but expand our call at the Hackett word on a much broader basis as these things kick off..

So Ted, you mentioned, you’re seeing both an increased volume and the number of assignments but also larger assignments.

I wondered if you could put some general numbers around that?.

Without getting into numbers, because you know we always thought you whether or not we will have put new facts on board, because then we feel compel to do that every quarter. I’ll simply say that the number of significant opportunities in the first half of the year are doubled where they were a year-ago.

And so we can see the clients are asking us to help them more broadly or even in existing offerings like an EPM implementation, larger clients are asking us to help them. And I think that both the credibility with the channel, but that’s also the Hackett capability and credibility expanding in the marketplace broadly..

Lastly from me. You mentioned you were trying to more closely mere your U.S operator, your European operations with your U.S operations.

Could you explain what you mean by that?.

Well. Our U.S operations have – as we just said our U.S.

operations have a very significant EPM grew that represents 49% of our Hackett revenues, that’s one to mention that we have invested in Europe, but obviously do not have anywhere – we’re just we’re in the starting – we are at the starting guided developing that capability, but put your leaders on the ground started hiring people, have been doing, have been signing our new engagements.

That’s a one example of the scale and capability very differently. We also have a transformation business in the U.S that broadened into procurement and operations much more broadly than it does in Europe.

So we’ve been looking for ways to broaden that procurement and operations capability in Europe, we have significant clients there, but we don’t have the people in the scale that we have in the U.S.

And then I would say if I go to the AMS side, even though we have one of our largest clients in the AMS area reside in Europe, we have a much broader presence in both the number of people they go to market representing our AMS capabilities that’s surround our SAP and Oracle business and that has an impact as well.

So those are two like, easy examples of how Europe differs from our capabilities in the U.S..

Okay, perfect. Thanks guys..

Thank you. [Operator Instructions] Our next question is coming from Mr. Morris Ajzenman from Griffin Securities. Your line is open..

Hey guys..

Hi, Morris..

Hi, Morris..

I’m looking at the strategic relationships that we previously discussed CIMA, Oracle, ADP your company gearing up this year with these three new ventures training the sales force et cetera, et cetera.

And 2016 we see some sort of particulars, I know its tough you talking some perspective norms because everything is under come but is there anyway you can discuss the opportunities for 2016 new contracts anything to give sense of baseline what could happen at a minimum anyway you kind of frame that process for 2016?.

We’re looking at those three opportunities and they are very different. And we continue to pursue others. But we look at those three opportunities. And the ADP comes with a multi-year, multi-million dollar guarantee that have to happen over an 18-month period.

So we know for a fact that the ADP relationship will drive increased revenues for us once we kicked this off hopefully before the end of this quarter.

So that one is certain, when we look at CIMA we know that the addressable market for CIMA is large we think that our ability to have a complete suite of offerings across all level of shared and certain and global business service professionals is going to be important.

But we do have an entry level program and plan to have a second program that would be our completed and ready for the market very early in 2016 and then we plan to have a management level program that we plan to have sometime in mid-2016. So there it’s a new offering, we know its an addressable market.

We obviously know the level of success and market credibility that our partner has, they know the kind of IP and access that we have the large clients who have these large shared services and global business services. So again, we would expect to have some impact from that offering growth throughout 2016.

And then lastly HPE, the HPE, Oracle relationship, well that relies heavily on the joint success of both the Oracle business intelligence cloud service and ours and look we know how aggressively they are pursuing and marketing the offerings we started to train their sales force, this quarter we expect to completed sometime before the end of the quarter.

So again, we’ll have a chance to have some go to market real go to market activity during the fourth quarter as we enter 2016.

But we don’t want to put a number on it, because we think it would be misleading but we would expect the impact to be visible because of both the opportunity in the channel and more importantly or whatever we build throughout 2016 we would expect this to continue to grow rapidly into 2017..

Are you allowed to discuss contractually, your share of profits of revenues?.

I’m sorry, which for – for which one Morris?.

For any of them it allowed to discuss?.

Well, no. I mean our HPE offerings is sold, those – the margin and price for that offering is sold with the margin implied for this offering – I mean, obviously will do whatever we needed to help them close business and provide incentives accordingly.

But those – the margin opportunity that we’re originally envision with HPE in this new alliance – we retained it all, as Oracle has done the same with their offering. So we believe both offering help to sell one another. So it’s a very good relationship.

On the CIMA side the alliance agreement that we hope to finalize and execute that is being proposed as they complete partnership. So the share of profitability, revenues and profit and M&A from that activity – it will be shared equally.

And then on the ADP side, a look – I mean they, we have a pricing per program that relies on the size of the clients, that’s what – that’s what determines the ultimate pricing on that product.

But ADP truly controls that, but the opportunities, the way we structured it, a guarantees, provides us with at least the same margin opportunity we have in executive advisory today.

So again what we love about it is that – it goes to market with a much broader channel, the delivery of our IP and all of those of those offerings, the investment of HPE has been made the delivery of our IP there is – repurposing and repackaging.

So it can be done very efficiently, so – we would expect these to be recurring very high margin businesses compared to our traditional secret service business..

Recurring revenues.

What percent of revenues is that – exit this quarter?.

We exited the quarter at – when you look at AMS and executive advisory, it’s approximately 15%.

But I always like to remind people just how consistent this universal client that turns the Hackett every time that seem to – to want to look at just how well they’re executing these activities that we have so much information around, how regardless of time, how consistently they turn to us – I would like to remind people this is what’s recurring.

But we proven overtime that when somebody of suffers from productivity improvement. We seem to get our fair share of very large clients they not return to us and that’s been great for our business..

One last question, I’ll get back in queue.

Europe is up 9% this quarter was it profitable?.

Yes. Europe is profitable and well, always be very profitable and by the opportunity and Europe profitability is significant because so much of our IP and other expenses and all these things are invested and reside and continue throughout the globe. So it’s not Europe depended.

So it’s not an issue of profitability is that we are at a Europe is at a third of our 08 profitability. I mean our opportunities in Europe, its Europe was to really have see sustainable growth are just very, very substantial.

So we’re disappointed that we’re not going to see that momentum carry at the Q3, if you remember last year we saw nice upticks from Q2 to Q3. There are simply not going to be able to keep up with that. So on a local currency basis as Rob said they are going to be down around 10%, 12% and when you add FX there is another 10%, 12%.

So we expected it to be down about 20% or 25%. The beauty of the overall strength of our model is that our U.S. business which was up around if you take out that software sell was up nearly 15%, we expected it to continue at that pace for the foreseeable future.

So it’s just going to offset any short-term weakness in Europe or any FX and we’re experiencing in that what’s driving such strong results..

And that’s kind of Europe at 25% in third quarter well that mean loss or it would be profitable?.

No, no. It will be profitable. We don’t do anything at loss Morris. We – I don’t say that implicitly we just don’t I mean we have – it has meaningful margin protection is just the opportunity we are leaving that we previously achieved that just very significant we’d love to get it back.

But as we told our investor base throughout the year until we see it actually materialize and Europe, we’re not going to count on it. We didn’t depend on the Europe improvement in our 2015 plan as you can see we are at or above any plan number we’ve share with the marketplace so far including our Q3 guidance..

Thank you..

Thank you. At this time, I’m showing no further questions. I would now like to turn the call back over to Mr. Fernandez..

Okay. We’ll then let me thank everyone for participating in our second quarter earnings call. We look forward to updating everyone again when we report the third quarter. Thank you again for participating..

Thank you for participating in today’s conference. You may now disconnect..