Ted Fernandez - Chairman & CEO Robert Ramirez - CFO.

George Sutton - Craig-Hallum Jeff Martin - ROTH Capital Partners.

Welcome to the Hackett Group Fourth 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. Robert Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin..

Good afternoon, everyone and thank you for joining us to discuss The Hackett Group's fourth quarter and full year 2015 results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of The Hackett Group, and myself, Robert Ramirez, Chief Financial Officer.

A press announcement was released over the wires at 4:42 PM Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data 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. And thank you, welcome everyone to our fourth quarter earnings call. As we customarily do, I will start the call by trying to provide some overview or highlight comments relative to our quarter, and also some comments about our annual results.

I will then turn it over to Rob and ask him to provide a really detailed review of operating results, cash flow and also our guidance. Rob will then turn it back over to me, I will provide some market and strategic overview comments and then we will it open it up to Q&A.

So first let me start with the highlights, and again, welcome everyone to our fourth quarter earnings call. This was another very strong quarter. This afternoon we've reported revenues of $66.4million, up 10%, 12% on a constant currency basis and pro forma earnings per share of $0.21, up 23.5%, both at the high end of our guidance.

Continued, strong U.S. demand drove our results as our momentum was really experienced virtually across all of our U.S. practices. Our record results were in spite of weak European results and the unfavorable impact of FX which reduced pro forma earnings per share by $0.01.

More importantly, this momentum carries onto our 2016 fiscal year, and more specifically our Q1 guidance. Additionally, we will use our strong cash flow to increase our annual dividend by 30% to $0.26 in 2016. Let me provide some operating details.

Revenue in North America was up 18%, with all Hackett practices up nicely with specifically strong performance from our enterprise performance management or EPM group. Excluding our ERP or SAP implementation group which was essentially flat, our North American business grew 23%, representing the second quarter in a row that our U.S.

business has exceeded 20% revenue growth. As I mentioned, European performance was weak with revenue down 22% on a reported basis and down 14% on a local or constant currency basis. Our growth in the U.S. is a direct result of several key strategies.

Growing our so cold wedge or benchmarking and best practice advisory offerings which leveraged our intellectual property or IP for strategic access to leading global companies and by building a dedicated sales channels which has also resulted in the increased downstream of consulting revenue growth as well as higher margins.

This is a great example of how the unique value of our IP extends through our consulting offerings. Secondly, consolidating several of our Hackett practice is to improve collaboration and cross selling has allowed us to serve clients more broadly. As an example, revenue from our top 20 U.S. clients this year grew significantly over the prior year.

Third, continuing to add and upgrade talent, and building a more efficient resource pyramid or delivery model which has resulted in improving gross margins as we increase headcount.

And lastly, by identifying new channels through our large strategic partners to use our benchmarking in best practice IP to open up new recurring revenue high margin offerings that could redefine the organizational model as the first true performance approvement IP as a service business.

We are seeing favorable indications from these new alliances and news channels. As I mentioned last quarter it is impressive when we see how large software or professional development organizations use our proprietary benchmarking in best practice implementation IP and insight to influence the sale and value proposition of their offerings.

We also believe that the operating improvements that are driving these results are structural and therefore should be sustainable. On the balance sheet side, during the quarter, we declared our semi-annual dividend which was paid shortly after the end of our fiscal year.

We also generated very strong cash flow and fully paid down the remaining $9 million that was outstanding of our credit facility. We exited the quarter with over $23 million in cash which represented increase in our net cash position of $16 million. Moving to our annual results, we had truly an outstanding year.

We reported gross revenues of $261 million, an increase of 10% on a reported basis and 13% on a local or constant currency basis. More importantly, our pro forma earnings per share totaled $0.75, a 34% improvement. This is even more impressive when you consider that we were up 37% in 2014, and that the improvement was driven by organic growth.

Allow me to take a second to congratulate our entire organization. On the investment front, we continue to develop new technology and delivery platforms to help us further differentiate and leverage our benchmarking in best practice IP to our clients and alliance partners. We also continue to look for ways to more closely mirror our U.S.

capabilities in Europe so we can improve our ability to grow in that region and also to further strengthen our global delivery capabilities which are important for our large multi-national engagements. Lastly, we also continued developing or track talent and expand our permission of our organization and brand.

These investments are continuing to improve our ability to compete and will bring new opportunities for our organization which I will comment in more detail in my strategic overview section of our call.

I will also further comment or market conditions but let me first ask Rob to provide details on our operating results, cash flow and also comment on outlook for guidance..

Thank you, Ted. As I typically do, I will cover the following topics during this portion of the call, an overview of our fiscal 2015 results, as well as our 2015 fourth quarter results along with an overview of our related key operating statistics.

I'll also cover an overview of our cash flow activities during the quarter and I will then conclude with a discussion on our financial outlook for the first quarter of 2016. 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 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% cash tax rate.

Before I move to the fourth quarter results, I'd like to discuss a few highlights regarding our annual results for fiscal 2015. Annual revenues total $261 million, an increase of 10% and 13% in constant currency over the prior fiscal year. Pro forma earnings per diluted share were $0.75 in 2015 as compared to $0.56 in 2014, an increase of 34%.

The 2015 fiscal year results were negatively impacted by approximately $0.035 due to foreign currency fluctuations. North American revenues were up 14% with international revenues down 8% for the fiscal year.

Pro forma EBITDA for the fiscal year was $37 million, an increase of 34% over the prior year, this also represented 16% in net revenues, a 280 basis point improvement from fiscal 2014. During fiscal 2015 we continued to utilize our strong cash follow to return capital to our shareholders.

We declared dividends of $0.20 per share for a total of $6.3 million that's paid semi-annually. The dividend declared in December was paid shortly after the end of the fiscal year.

We repurchased approximately 446,000 shares of the company's stock at a price of $8.60 per share for a total of approximately $3.8 million, both in the open market as well as from employees to satisfy withholding tax obligations.

Now specifically in terms of our fourth quarter results for the fourth quarter of 2015, total company gross revenues were $66.4 million and above our fourth quarter's guidance. This represents year-over-year growth of 10% or 12% when adjusting for constant currency.

Gross revenues for The Hackett Group which excludes ERP Solutions was $55.6 million in the fourth quarter of 2015, an increase of 12% on a year-over-year basis or 14% on a constant currency basis. Strong Hackett U.S.

growth of 23% more than offset international revenue declines, primarily from Europe, which decreased 22% or 14% on a constant currency basis. Hackett Group annualized gross revenue per professional was $366,000 in the fourth quarter of 2015, as compared to $342,000 in the fourth quarter of the prior year and $396,000 in the previous quarter.

This is solid quarterly improvement when you consider the lower available billing days on a sequential basis due to the holiday season and related vacation.

Gross revenue from our ERP Solutions Group which consists of our SAP Reseller, Implementation and Application Managed Services Groups or AMS, totaled $11 million for both the current quarter and the same quarter in the prior year.

Total company international gross revenues accounted for 14% or 15% in constant currency of totaled company revenues in the fourth quarter of 2015 as compared to 20% in the fourth quarter of 2014.

Our recurring revenues which include our AMS groups, as well as our executive advisory practices now make up approximately 13% of our revenues and 21% of our pretax practice profitability.

Total company pro forma cost of sales, excluding reimbursable expenses and stock compensation expense totaled $35.4 million or 58.7% of net revenues as compared to $32.3 million or 59.2% of net revenues in the previous year.

Total company consultant headcount was 842 at the end of the fourth quarter of 2015, as compared to 827 in the previous quarter and 762 at the end of the fourth quarter of 2014. Total company pro forma gross margin was 41.3% of net revenues in the fourth quarter, as compared to 40.8% in the fourth quarter of the previous year.

Hackett Group pro forma gross margins on net revenues was 39.6% in the fourth quarter of 2015, as compared to 38.7% in the fourth quarter of 2014, a 98 basis point improvement, primarily due to increased revenue per professional achieved as a result of increased utilization and rates when compared to the prior year.

ERP solutions pro forma gross margins on net revenues was 50% in the fourth quarter of 2015 as well as in 2014, as both quarter benefited from strong fiscal year end license sales activity.

Pro forma SG&A was $14.9 million for both the fourth quarter of 2015 and 2014 but represented 24.7% of net revenues in the fourth quarter of 2015 as compared to 27.4% of net revenues in the previous year, a 270 basis point improvement due to offering leverage on increased revenues.

Pro forma EBITDA in the fourth quarter of 2015 was $10.6 million or 17.6% of net revenues as compared to $7.9 million or 14.5% of net revenues in the fourth quarter of 2014, an increase of 34%.

Total company pro forma net income for the fourth quarter of 2015 totaled $6.9 million or $0.21 per diluted share which has Ted mentioned was at the top end of fourth quarter's guidance. Earnings per share in the quarter were negatively impacted by approximately $0.005 due to the impact of foreign currency fluctuations.

This compares to pro forma net income of $5 million or $0.17 per diluted share in the fourth quarter of 2014, an increase of 24% on a year-over-year basis.

Total company pro forma net income for the fourth quarter of 2015 excludes non-acquisition stock compensation expense of $1.5 million, non-recurring expense related to the performance based stock appreciation rights of $1.3 million, acquisition related stock compensation expense of $250,000 and intangible asset amortization expense of $565,000, and assumes a normalize tax rate of 30% or $3 million.

In 2012, the CEO and COO agreed to give up 50% of their equity incentive compensation awards for plan years 2012 through 2015 in exchange for 2.9 million of stock appreciation rights with an exercised price of $4 only to be earned upon the achievement of 50% growth in pro forma earnings per share and 50% growth in pro forma EBITDA from the base year of 2011.

The grants would have expired if neither target achieved during a six-year term. In the first quarter of 2015, the outstanding SARS awards for the achievement of 50% growth in pro forma EPS vested.

Subsequent to year end 2015 in connection with the company's achievements of over 50% growth of pro forma EBITDA since fiscal 2011, the remaining SARS vested. This resulted in non-recurring, non-cash stock compensation expense relating to the SARS awards of $1.3 million in the fourth quarter of 2015 and $2.7 million on year-to-date basis.

GAAP diluted earnings per share were $0.12 for both the fourth quarter of 2015 and 2014. GAAP results for the fourth quarter were unfavorably impacted by the non-recurring $1.3 million accrual for performance based stock appreciation rights which have been fully earned as well as a higher effective tax rate when compared to the prior year.

At the end of the fourth quarter of 2015, the company has approximately $2.3 million of income tax loss carry forwards remaining in the U.S. relating to state taxes and approximately $7.6 million in foreign tax jurisdictions respectively. We have fully utilized our U.S. federal net operating losses during the fourth quarter of 2015.

We will continue to have the ability to offset most of our international tax liabilities through 2016. For those of you who track this, diluted weighted average shares outstanding used in our earnings per share calculation grew by approximately 3 million shares on a year-over-year basis.

Approximately 1 million of this change is due to the diluted impact of SARS that vested at the beginning of 2015. Approximately 800,000 shares is due to the impact from the increase in our average stock on our weighted average share calculation, and the remaining is due to the impact of share vesting activity partially offset by stock repurchases.

The company's cash balances were $23.5 million at the end of the fourth quarter of 2015, as compared to $16.3 million at the end of our previous quarter. Cash in the fourth quarter was generated from net income adjusted for non-cash items, partially offset by the payoff of our outstanding debt.

Net cash provided by operating activities in the fourth quarter of 2015 was $17 million, which was primarily driven by net income, adjusted for non-cash items, increases in accrued expenses, increase in accounts payable and decreases in accounts receivable.

Our DSO or Day Sales Outstanding at the end of the fourth quarter of 2015 was 58 days, as compared to 60 days at the end of the previous quarter. During the fourth quarter of 2015, the Company full repaid its remaining outstanding debt of $9.3 million. During the fourth quarter, we did not repurchase any shares of the company's stock.

However, subsequent to year end, the company utilized $4.2 million to repurchase 302,000 shares at an average cost of $13.83. In addition, the Company's Board of Directors approved an additional $5 million increase to our share buyback authorization. As a result, our remaining stock repurchase authorization is currently at $3.1 million.

I'll now turn to our guidance for the first quarter of 2016. Before I move to guidance, I would like remind everyone of the seasonality of our business relative to cost as we move sequentially from Q4 to Q1. Specifically, consistent with the first quarter guidance I provided in the previous years.

Our first quarter guidance of 2016 will reflect the sequential increase in U.S. payroll related taxes and the sequential buildup of our vacation accruals. We expect total company gross revenues for the first quarter of 2016 to be in a range of $66.5 million to $68.5 million with a reimbursable expense estimate of 11.5% on net revenues.

On the total company basis, we expect revenues to be up 10% to 12. We expect strong U.S. revenue growth of approximately 15% to 20% with European revenues to be down approximately 10% to 15%. As such, we expect our pro forma diluted earnings per share in the first quarter of 2016 to be in the range of $0.18 to $0.20.

The high end of this range would represent a year-over-year increase of 25%. This includes the impact of a year-over-year increase in weighted average shares outstanding of approximately 3 million when compared to the first quarter of the prior year.

This is driven by the diluted impact of the vesting of SARS of 1.3 million shares to diluted impact of higher share price on our weighted average share calculation of 800,000 with the remaining variance due to the impact of share vesting activity, partially offset by stock repurchases.

Our pro forma guidance excludes amortization expense, total non-cash stock compensation expense and includes on normalized cash tax rate of 30%. We expect pro forma SG&A and interest expense for the first quarter to be approximately $14.5 million. We expect first quarter pro forma EBITDA on net revenues to be in the range of approximately 15% to 17%.

We expect our cash balances, excluding the impact of share buyback activity to be a sequential basis due to the payment of 2015 performance related bonuses and the fourth quarter dividend declaration that was paid early in the first quarter, as well as the payment of estimated U.S. federal corporate income taxes.

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 and consistent with fiscal 2015, we expect continued growth in Q1 from our U.S. business across nearly all of our groups. In Europe, we expect the revenues to be sequentially up, but down on a year-over-year basis.

We expect European 2016 performance to stabilize throughout the year, but we will not plan on this improvement until we experienced and reported for several quarters. We continue to expect one of the key drivers of our U.S. growth to come from the growing leverage of our so called wedge or benchmarking and best practice advisory services.

Our benchmarking and best practice advisory offerings are highly differentiated and also provides significant downstream cross selling leverage to our business transformation and technology consulting groups. We continue to invest strongly on both of these areas.

In 2016 we plan to roll out a new benchmarking offering that will fully incorporate our HPE technology and other innovations into our traditional benchmarking platform that will improve and further differentiate the values delivered through our benchmarking offerings.

In Advisory, our alliance relationships are helping us invest in new technology and offerings that will improve our clients' access and leverage of our proprietary insight that we deliver through our best practice programs.

Another key driver of our growth strategy has been to continue expand our market leading, enterprise performance management or EPM business which now represents nearly 50% of our Hackett revenues.

We believe that the combination of assembling great talent and our unique ability to leverage, our best practice configuration and organizational excellence IP is responsible for this success.

Our ability to use this capability to help our software partners uniquely positioned the business value of their software when their product is optimally configured targeting the appropriate analytic and using our best practice insight continues to drive increasing sales channel collaboration.

We simply help them promote and position their software in a unique way. The completeness of our end-to-end capability as well as our unique IP leverage also allows us to deliver a more credible and differentiated solution when we deliver our EPM transformation technology and application management services.

Rob mentioned the strong recurring revenue and margin performance that our AMS or Application Management Service groups are contributing to our overall results. This ability to help clients after they go live that use Oracle EPM and SAP allows us to maintain a recurring relationship with our clients.

The capability also allows us to leverage highly trained offshore resources effectively that have clearly strengthened our implementation teams as well as our operating performance.

Our long-term strategy is to continue to build our brand by building new offerings and capabilities around our unmatched best practice IP in order to save clients, 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 enhance our opportunity to serve clients remotely, continuously and more profitably. Our goal is to use our unique IP to establish a strategic relationship with the clients directly or through strategic alliances and channels, and to further use as entry point to introduce our business transformation and technology capabilities.

A long-term goal continues to be able to scribe an increasing percentage of our total annual revenues to clients who are continuously engaged with us through our executive and best practice advisory programs and also through our Hackett performance exchange relationship.

At the end of the quarter, our executive in best practice advisory members totaled 960 across 305 clients.

Consistent with prior quarters, over 40% of our Hackett sales who are also advisory clients which continuous to support the leverage of this entry or IP wedge offering not only to introduce our capabilities to our client but to also see of serving more broadly.

We announced last quarter that we're announcing opportunities through our alliances and channels to use our IP to help other sell and deliver their offerings. In the fourth quarter we launched and started building our pipeline of joint opportunities with ADP that added a dedicated Hackett best practice advisory program to ADPs Vantage HCM Solution.

Early indications from ADP sales force as well as their clients are very favorable. In fact, we are already serving clients that are utilizing this new best practice advisory program dedicated to ADP.

We expect our pipeline as well as close deals to build throughout the year and to expand to provide an indication of this ramp as we previously have stated when we report the first quarter. Last quarter we also discussed our new alliance with CIMA, the Chartered Institute of Management Accountants.

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

We launched our training of CIMA and Hackett resources during the fourth quarter and started to share our entry-level program with clients, and early indications are also very favorable. Our plan is to augment our existing entry-level program with an executive-level program this coming April and a managerial-level program in July.

At that time, we will have completed our curriculum and have the entire programs rolled out. We have started to build a good pipeline of activity which I said with very favorable client reaction, and we believe the only thing holding us back is our need to complete our curriculum so that our prospects can fully see the value of the programs.

We have over 20 clients who have already committed to pilot programs and are using our entry-level course as part of their assessment. We believe this ability to ramp throughout the year will accelerate as we roll out the other two programs and clients complete the initial pilot programs.

Lastly, we also announced our new joint marketing plan with Oracle that will include sales of HPE, or Hackett Performance Exchange, along with the sale of Oracle's new Business Intelligent Cloud service, or BIC. During the quarter, we exposed a large number of Oracle BI sales force to this joint offering and we'll continue this training into 2016.

This program now has a few clients, and we believe this activity will increase as Oracle becomes more familiar with both their new Cloud solution as well as the integrated value of HPE. Our benchmarking in best practice IP leverage strategy allows us to increase the client's base profitability and increase revenue for client.

It would also represent an increase in recurring revenue at much higher margins due to the way these services are contracted as well as delivered.

Lastly, even though we believe that we have the client base and offerings to grow our business, we continue to look for acquisitions and alliance that can strategically leverage our IP and add scope, scale and capability which can further accelerate our growth. In summary, we reported another strong quarter and we concluded a record year.

More importantly, we are seeing that improvements in investments we are making in our IP, in our sales channel and in our expanded EPM and AMS focus will continue to drive structural growth.

As always, let me close by thanking our associates for their tireless efforts and always urge them to stay highly focused on our clients, our people and the exciting opportunities available to our organization, and finally close by again congratulating them on an outstanding year. Than you operator, those are my comments.

We're now ready to open it up for Q&A..

Thank you. We will now begin the Question and Answer session. [Operator Instructions] Our first question is from George Sutton from Craig-Hallum. Sir, your line is now open..

Thank you. Nice results guys. And frankly, even more impressive I would say would be Q1 guidance, and knowing you have liquidity for conservative guidance and knowing that Q1 is generally or seasonally a slow quarter simply from an EPS perspective.

Can you give us a sense of kind of what's driving this confidence? Was it just continuation of what you saw in Q4? Is there something that's changing in Q1?.

George, first, thanks you for your comments. But it's simply, not only the way that our fourth quarter played out, but actually how we completed the quarter. I mean our momentum continued right through the end of the year and that carries into the New Year.

So it gave us the level of confidence to provide that kind of guidance, and it's important to know that that kind of EPS growth that Rob mentioned is based on 2% to 3% more weighted average share dilution, so it means that we would be guiding even on higher operating results to meet those EPS targets in the first quarter..

So, your one frustration, or I'm sure you have more than one, but the key frustration has been Europe and I know you've made some management changes, made go to market changes, obviously it hasn't yet had a real impact. What is the thought process there? You mentioned it maybe several quarters before we start to see any real growth on that market..

First, I would say frustration is not a word that I use. You've known me long enough to know that I guess the first thing I would comment relative to Europe is that we're incredibly persistent and rarely give up.

The European marketplace has been a highly profitable marketplace for us, and yes it's significantly underperforming from any of the highs that we experienced in the '08 timeframe. But having said that, we still believe that the key is to more closely mirror the capabilities of the U.S. in Europe and to add scale.

So we're continuing to higher and focus our efforts on those capabilities that the European region have not had. We're also cognizant of the fact towards that -- look, the European marketplace is not nearly as active in generating the demand in general to our competitors or to the clients that we serve. So we want to do it.

We think that the opportunity for improvement still remains -- is still there for us to have it and to recapture it, and as I said in our comments, we expected to improve in '16 but none of our financial plan will count on it until like we've said we've seen it for few quarters and have reported it, and we're actually able to share it with you.

So we remain cautiously optimistic and we'll continue to look for ways that talent and capability to bring that performance back in line with what it should be which is up significant even to our current operating results..

Okay. And then one last question, just to bridge some timeframe. So you mentioned the Oracle, CIMA and ADP relationships and mentioned that there are some customers and some modest revenues initially that you maybe seeing. You also mentioned in your prepared comments that this IP as services alliance could redefine your business model over five years.

Could you sort of bridge the gap as to when it becomes more significant in your mind?.

We do expect, even though we're not again in our 2016 financial plan are not counting on it but we do expect for revenues across these three alliances to ramp throughout '16 and to be noticeable in the second half until the noticeable operating results in 2017.

So -- now look, in the cases that the offerings can grow, even though it varies by the specific opportunity, the three specific opportunities that I've mentioned.

We feel -- we still believe very strongly that these are significant opportunities that not only come with recurring revenue but at significantly higher gross margins that are then -- than we have in our existing business. So no, I think hopefully that provides some color which we would expect it to ramp.

It is revenues that required you to sell the deal right before than you have that recognized monthly for all three of the offerings. But we would expect that to start accumulating, and as I said noticeable and then become meaningful in 2017.

I mentioned in our last quarter that we would have an indication of ramp by the end of the first quarter; we still believe that because we see the pipeline activity developing. So once we get a better idea of how that closes and when we actually get a chance to start recognizing revenue I think we'll be able to provide that insight.

I think specifically to the CIMA offering, which we say we're getting a very favorable reaction but that we're only adding the entry level instead of the complete entry, managerial and executive level. We don't believe that in CIMA we'll get to see the real benefit of that ramp until all three courses are out which won't be until July.

But even for those programs, by the end of the first quarter we'd like to be able to tell you that we've got a meaningful number of clients in pilot programs and that the response for those clients is favorable and that as we build out the programs, then the amount of spend or the amount of -- in our book overtime, the amount of their total training budget for these shared service and global business service centers becomes meaningful.

So it's just a nature of a new venture, new channels and then the way the revenue ramps, closes and is recognized. That requires some time for us for it to become significant..

Perfect. Thanks guys..

Thank you, George..

Thank you. [Operator Instructions] Our next question is from Jeff Martin from ROTH Capital Partners. Sir, your line is now open..

Thanks. Hi Ted, Hi Rob..

Hi, Jeff..

Ted, you mentioned some new benchmarking offerings in 2016.

I was just wondering if you could elaborate on that and what has been the catalyst for driving those new offerings?.

Without giving away too much -- because our benchmarking team wants us to be properly launched but look, we've learned quite a bit around how to create a dramatically stronger user interface, how to capture data, repopulate data and even more importantly, when you think of The Hackett performance change, Hackett extract data directly from client systems in order to populate the information that we want to gather from clients when they go through a benchmark.

So the initiative that we have had now for over a year and that we hope to be able to formally launch as second half next year would bring all of the extraction capabilities, user interface improvement, reporting capability, the focus on the nature of questions, adding more content around the nature of the best practice inside matrix that we can leverage.

I mean everything that we're learning, not only from The Hackett performance exchange experience, but even some of the learnings now from our offerings that we are driving to some of the new alliances.

Our things that we believe will be incorporated and allow us to come out with a new generation of benchmark, capabilities and platform that in our view we think our database and the comparisons are unmatched and already create a highly differentiated offering from any of our -- I'll call it propose or suppose competitors.

We think that launching this will just further define us as to clear market leader in enterprise benchmarking globally, unless somebody is working with any of our knowledge, we're just going to create greater distance and allow ourselves to capital matrix and best practice insight which drives all these things that were leveraging into these new channels and IPO as a service.

So it's a continuation -- Jeff of the investments we've been making for years, and then the learnings that we getting from these new offerings and relationships.

And really, it's no different than our clients, we're taking all of these knowledge and we're thinking and rethinking at all in the concept of this new digital era which allows us to really rethink of the network effect of constituencies, not only clients that are providing that data, where we gather data, how it's supported.

It's really the same thing that we're asking clients or trying to help clients rethink relative to their business model, we're applying it to our own.

Again, we think it will be clearly distinct and further differentiate Hackett and allow us to further expand our brand and allow us to further develop new IP at the service offerings that will go through new strategic channel..

All right.

Can you expand on your comment, efforts to strengthen the global delivery capabilities, is there something specific driving that? Is that something that has been overlooked for a while or something that you are just seeing as strength from your client basis is kind of pointing you to do that?.

I think we've recognized that we have data inside and talent that's really unique to our organization but when you think of our competitors, they are significantly larger than we are. So we're cognizant of the fact that we need to be able to not only provide really smart insight but it needs to be in the global context in which we engage the men.

So when we think of global delivery capabilities, it's the combination of what data we capture, how we leverage that throughout our IP-related offerings but it's also -- this relates also to the international expansion. And the fact that just take Europe as an example.

It's not overlooked, we'd love Europe to look, to have the scale and capability of the U.S. model. But if we did that without doing that under the right demand environment, we simply would -- we would just be blowing away a lot of profitability that our shareholders and everyone is benefiting from.

So it relates to, we want to be -- we'd love to be bigger, we'd like to be able to replicate the U.S. capabilities in Europe, and clearly we want to continue to gather more data, more broadly from these global companies that we serve to allow us to simply be smarter and have better ideas than our competitors..

Okay. And then, I didn't catch specific comments on the macro climate within the client base. I mean I would imagine you'd get some pretty good intel in terms of what people are thinking about in terms of the global economy and also the U.S. economy.

Could you give us kind of what you're hearing from your client base? Your results wouldn't suggest any slowdown but just curious what you're hearing from them?.

Yes, and I'll speak to what it means to our results but more broadly let me first speak for the macro.

I mean, look, without a doubt that there are lot of macroeconomic events that are driving volatility that are challenging many of our clients and that goes to not only geopolitical instability to the incredible reduction of volatility and commodity prices.

And the fact that whether people want to hear it or not, the stimulus that has been driven in through the U.S. economy and now has been -- is now being driven into Europe, and China, and Japan, I mean just follow all the Central Banks, has not had a significant impact in global growth. So people know that China is slowing.

For us, look, we believe they've been slowing for a while, and that if you want to call it -- people are simply adjusting to, I believe growth that was already decreasing or more muted. If you really go back to even early '14, I think we're simply is acknowledging and reporting what people were speculating as we got to the second half of 2015.

Japan continues to struggle growing, right. We've been struggling to even deal with any rate increases in the U.S. because of the fragile nature of the U.S. economy. And look, the U.S.

economy is critical to entire global growth and I really think that Fed will be more cautious to make sure that we don't ruin the kind of impact that we're seeing in the U.S. in terms of demand, as well as the impact that it has globally.

And in Europe, I mean, I think ECB has done everything it can to drive that European economy but if you look at the growth rate expected in that region, I mean, they struggled to talk about something that will be greater than 1%. So macro, we're assuming that we'll continue to see GDP at/around 2% for the U.S.

and you'll see that, and you'll see volatility drop some muted quarters and some strong quarters, no differently than we saw in '14 and '15.

In Europe I think that it is, it will be more stable but the struggle to be at 1% if you would take the 28 country community, the way we look at it and we think that China's slower growth will further capture rate of the Asia growth and the impact that it has in Europe and to a lesser effect, it has in the U.S.

So I started my comments by saying that consistent with fiscal 2015, even though right the market has been expecting a lot more volatility globally then in the second half of '15 or as we exit '15 that we saw in the first half of '15, look, we're assuming that we're staying in the 0% to 2% GDP growth.

For us, I believe that I'd assume all the way to minus 2%. Just continues to elevate the productivity of being that everyone must have under a sluggish growth environment.

So if you really believe that revenue plans are going to be developed, that they have through the last several years, the companies will struggle to meet as they get to the mid-part of their year and people will then have to reset their plans for 2016 and all of a sudden realize that if you want to make sure that you're achieving the targets, performance and EPS targets that have been commented or shared with Wall Street, you're going to have to do it with continued productivity improvement.

And if you think of productivity improvement, I will tell you, we clearly are getting our fair share of activity, even as it relates to -- as you know, much larger competitor.

So macro, I think we all know what that is relative to us, I think in that sluggish growth environment productivity continues to be highly -- very important, and I think our ability to help clients with productivity improvement is proven and only expanding as we enter 2016..

Thank you, Ted, and thanks for taking my questions..

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

Well, let me again thank everyone for participating in our fourth quarter earnings call and the summary of our annual results. And again, let me simply close because of the nature of the year by simply congratulating our entire team for their performance and I hope this momentum continues throughout 2016. Thank you for participating.

We look forward to catching up again when we report the first quarter..

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