Ted Fernandez - Chairman & CEO Robert Ramirez - CFO.

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

Welcome to the Hackett Group First Quarter Earning Conference 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 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, Robert Ramirez, CFO. A press announcement was released over the wires at 4:05 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 welcome everyone to our first quarter earnings call. As we ordinarily do, I will open the call with some overview or highlight comments on the quarter. I will then turn it back over to Rob and ask him to comment on detailed operating results, cash flow and also provide our comments as well as the guidance.

Rob will then turn it back over to me, so that I can provide some market and strategic overview related comments and then we will it open it up to Q&A. So again let me start with the overview and highlights, and again welcome again to our call. This is another very strong quarter.

This afternoon we've reported revenues of $68.8 million, up 13%, and pro forma earnings per share of $0.20, up 25%, both at the high end of our guidance.

The results are even more impressive when you consider that our pro forma EBITDA was up 32% and the reason our EPS increase was tempered was due to an 11% increase in weighted average shares outstanding resulting from primarily divesting of performance-based stock appreciation rights and the impact of increased share price on our weighted average share calculation.

Consistent with all last year's strong U.S. demand drove our results as our momentum continued across virtually all of our U.S. practices. Our record results were also in spite of weak European results. More importantly this momentum carries on to Q2 guidance along with a favorable indication that European results could now be stabilizing.

Revenue in North America was up 30% which continues the trend that goes back to 2014, with all Hackett Practices up nicely and with continued strong performance from EPM, or Enterprise Performance Management Group. As I mentioned, European performance was weak with revenue down 19%.

As I mentioned at year end our growth was a direct result of several key strategies.

Growing our so called wedge or benchmarking and best practice advisory efforts which leverage our intellectual property or IP for strategic access to leading global companies by building a dedicated sales channel for those teams and increase downstream business transformation, revenue growth with higher margins.

This is a great example of how the unique value of our IP extends to our consulting offerings. Secondly, increasing revenue for clients. The consolidation of Hackett practices has resulted in improved collaboration and cross-selling and is allowing us to propose and serve clients more broadly. For example, our top 20 Hackett U.S.

clients generated approximately 50% more revenue in this quarter than a year ago. So wallet share with these large sophisticated clients continues to increase. Continuing to add and upgrade talent and building a more efficient resource pyramid which has improved gross margins as we have increased head count.

As you know we are far from a traditional consulting pyramid simply due to our scale, but we continue to try to expand the lower end of our resources so that it impacts, lowers cost of service per person.

And lastly, identifying new channels through large strategic partners to use our benchmarking and best practice intellectual property to introduce new recurring revenue high margin offerings that could redefine our organizational model as the first true performance improvement IT as a service business.

On a longer term basis, we are seeing that the rapid development of emerging cloud and web technology and digitization of everyday activities may result in one of the most significant enterprise transformation periods that we have ever experienced. I will expand on these thoughts a little later in my strategic overview section of our call.

On the balance sheet side. At the beginning of the quarter, we paid our semi-annual dividend which totaled $3.2 million. And we also continue to buy back shares as we acquired shares in the open market and from employees to satisfy withholding tax liabilities totaling $7.7 million.

On the investment front, we continue to develop new technology delivery platforms to help us differentiate and leverage our benchmarking and best practice IP to our clients and now also to our alliance partners. We also continue to look for ways to more closely mirror our U.S. capabilities in Europe.

This is something that we've been working on for several years and have yet to achieve, but we continue to focus on it very meaningfully, and we do that so that we can improve our ability to grow on that region and also further strengthen our global delivery capabilities which are important for large multi-national engagements which is our primary focus.

I'll also comment further on strategy and market conditions, but let me first ask Rob to provide details on our operating results, cash flow and also comment on outlook.

Rob?.

Thank you, Ted. As I typically do cover the following topics during our call. In overview of our first quarter results along with an overview of related key operating statistics. I'll do an overview of our cash activities during the quarter, and I'll then conclude with the discussion on the financial outlook for the second 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, and assumes a 30% long term cash tax rate. For the first quarter of 2016, total company's gross revenues were $68.8 million, and above our first quarter's guidance.

This represents year-over-year growth of 13%. The impact of foreign currency was less than half of a percent and was immaterial to the quarter. Gross revenues for the Hackett Group which excludes ERP Solutions were $57.9 million in the first quarter of 2016, an increase of 12% on a year-over-year basis. Strong Hackett U.S.

growth of 21% more than offset international revenue declines primarily from Europe which decreased 19%. Hackett Group annualized gross revenue for professional was $383,000 in the first quarter of 2016, as compared to $374,000 in the first quarter of 2015, and $366,000 in our previous quarter.

Gross revenue from our ERP Solutions Group which consists of our SAP reseller, implementation and application managed services groups or AMS. Total $10.8 million, an increase of approximately 16% on a year-over-year basis.

Total company international gross revenues accounted for 13% of total company revenues in the first quarter of 2016 as compare to 18% in the first quarter of the prior year.

Our revenues which include our AMS groups as well as our executive and best practice advisory practices now make up approximately 15% of our revenues and 18% of our pre-tax practice profitability.

Total company pro forma cost of sales excluding reimbursable expenses and stock compensation expense totaled $38.4 million or 61.9% of net revenues as compared to $33.6 million or 61.3% of net revenues in the previous year.

Total company consult head count was 861 at the end of the first quarter of 2016, as compared to 842 in our previous quarter, and 778 at the end of the first quarter of 2015. Total company pro forma gross margin was 38.1% of net revenues in the first quarter of 2016, as compared to 38.7% in the first quarter of 2015.

Hackett Group pro forma gross margins on net revenues was 38.3% in the first quarter as compared to 39.3% in the first quarter of the prior year. Primarily due to decreased revenue for professional and utilization in our international business primarily Europe when compared to the prior year.

ERP Solutions pro forma gross margins on net revenues was 38% in the first quarter as compared to 35.8% in the first quarter of the previous year, primarily due to higher software license sales when compared to that prior period.

Pro forma SG&A was $14.2 million or 22.9% of net revenues in the first quarter as compared to $14.3 million or 26% of net revenues in the first quarter of the prior year.

Pro forma EBITDA in the first quarter was $10.9 million or 16.2% of net revenues, as compared to $7.6 million or 13.9% of net revenues in the first quarter of the prior year, an increase of 32%.

Total company pro forma net income for the first quarter totaled $6.6 million, or $0.20 per diluted share which has Ted mentioned was at the high end of first quarter's guidance. This compares to pro forma net income of $4.8 million of $0.16 per diluted share in the first quarter of the prior year, an increase of 25% on a year-over-year basis.

Total company pro forma net income for the first quarter of 2016 excludes non-acquisition stock compensation expense of $1.6 million, acquisition related stock compensation expense of $268,000 and intangible amortization expense of $275,000. Pro forma results also assumes a normalized tax rate of 30% or $2.8 million.

As I mentioned when providing our guidance for the first quarter, this earnings per share increase includes the impact of a year-over-year increase in diluted weighted average shares outstanding of approximately $3.4 million in comparing to the first quarter of the prior year.

This was primarily driven by the diluted impact of divested stocks which totaled approximately $1.8 million.

In order to mitigate the increase in our fully diluted weighted average shares outstanding, on May 6, 2016, the board of directors approved the repurchase of 697,000 shares of its common stock from Ted Fernandez, the Chairman and CEO of the company; 732,000 shares of its common stock from David Dungan, the Vice-Chairman and Chief Operating Officer of the company; and 73,000 shares of its common stock from myself, the CFO of the company; for a total of approximately 1.5 million shares at a purchase price of $14.77 per share for a total of $22.2 million.

Following this repurchase, Mr. Fernandez remains the company's single largest individual beneficial shareholder. Additionally, 10B5-1 plan is currently in effect for these executive officers will be suspended for the foreseeable future. After this repurchase, approximately 3.1 million remained available under the company's share repurchase program.

This repurchase reduces weighted average shares outstanding by approximately 4% in this $0.03 to $0.04 accretive on manual basis. The transaction will be funded in the company's amended revolving line of credit which has been increased by $25 million.

GAAP diluted earnings per share was $0.13 for the first quarter as compared to GAAP diluted earnings per share of $0.10 in the first quarter of the prior year. At the end of the first quarter, the company has approximately $2.4 million of income tax loss carry forwards remaining in the U.S.

relating to state taxes and approximately $7 million in foreign tax jurisdictions respectively. We believe that we will continue to have the ability to offset most of our international tax liabilities through 2016.

The company's cash balances were $12.6 million at the end of the first quarter, as compared to $23.5 million at the end of our previous quarter.

This cash decrease in the first quarter was primarily attributable to incentive compensation bonuses paid for fiscal 2015, cash utilized to buy back stock including shares repurchased to settle employee tax obligations for net vesting activities as well as the payment of our semi-annual dividend.

Net cash provided by operating activities in the first quarter was $536,000 which is primarily driven by net income adjusted for non-cash items which amounted to $9.7 million.

As well as increases in accounts payable primarily due to the timing of payments relating to our AMS business, offset by decreases in accrued expenses primarily relating to the pay up of 2015 instead of comp bonuses and an increase in accounts receivable resulted from an increase in revenue and an increase in our DSO or days sales outstanding at the end of the first quarter of 2016 was 62 days as compared to 58 days at the end of the fourth quarter of 2015 and 63 days when compared to the first quarter of the prior year.

During the first quarter, the company paid $3.2 million for its semi-annual dividend which was declared in 2015. At this recent meeting, the board of directors declared the next semi-annual dividend of $0.13 per share which will be paid in July, 2016.

During the first quarter, we repurchased 307,000 of the company's stock at a total cost of approximately $4.3 million for an average cost of $13.85 per share. Our remaining stock repurchase authorization at the end of the quarter, as I mentioned, is approximately $3.1 million.

Additionally, we utilize $3.4 million to repurchase 255,000 shares of the company's common stock from employees to satisfy income tax withholding triggered by divesting of restricted shares. I'm not going to discuss our guidance for the second quarter of 2016.

We expect total company gross revenues for the second quarter to be in the range of 71 million to 73 million with a reimbursable expense estimate of 11% from net revenues. On a total company basis, we expect revenues to be up approximately 10% at the high end of the guidance range on a year-over-year basis with EBITDA growth of approximately 30%.

We expect U.S. revenue growth of approximately 10% to 12% with Hackett U.S. revenues up 15% to 20% and with ERP revenues expected to be down 5% to 10% and with international revenues expected to be flat to slightly up. As such we expect our pro forma diluted earnings per share in the second quarter of 2016 to be in range of $0.21 to $0.23.

The high end of this range will represent a year-over-year increase of 21%.

This includes the impact of a year-over-year increase in weighted average shares outstanding of approximately $2.2 million when compared to the second quarter of the prior year which includes the half quarter impact of stock repurchases from the executive management announced today.

The full benefit of the management stock repurchase will be reflected in the third quarter. Our pro forma guidance excludes amortization expense, total non-cash stock compensation expense and includes a long term cash tax rate of 30%. We expect pro forma SG&A and interest expense for the second quarter to be approximately $15 million.

We expect second quarter pro forma EBITDA on net revenues to be in the range of approximately 17% to 18%. We expect cash generator from operations to be up strongly in a sequential basis. At this point I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months..

Thank you, Rob. As we look forward, let me take a moment to speak more broadly about the demanding environment that we have been experiencing and more importantly that that maybe emerging.

The rapid development and move to cloud along with the extended mobility functionality being introduced into the marketplace by software and technology providers is going to dramatically change the way businesses compete and deliver their services.

This will disrupt the entire industry at an accelerated pace forcing organizations to fundamentally change and adopt these new capabilities or become extinct. The most obvious example is Uber, but you're seeing many other examples emerge that will fundamentally challenge traditional business models.

The speed of change will only be limited by the ability of technology providers to deliver on their promise. But regardless of their delivery limitations, the mere threat or opportunity will lead to one of the most significant enterprise transformation periods of our lifetime.

This will redefine traditional sequential and linear based business models and activities to fully network and dynamic automated workflows and events with enhanced analytics that will finally deliver on the promise of predicted analytics and artificial intelligence.

This so called digital transformation is very attractive to our organization since we believe our clients will increasingly turn to us to provide them with best practice insight on what technology can actually deliver, what changes in business models will actually work and will justify the significant investments that it would take.

On a near-term basis, we expect continued growth in Q2 from our U.S. businesses across nearly all of our groups. In Europe, we expect our revenues to be sequentially up and flat to up slightly on a year-over-year basis. We continue to expect one of the key drivers for our U.S.

growth to come from the growing leverage of our so called wedge or benchmarking and best practices advisory services. Our benchmarking and best practice advisory services are highly differentiated and have been providing significant and improved cross-selling leverage to our business transformation and technology consulting practices.

We plan to continue to invest heavily in these areas as we have previously mentioned in the latter part of 2016 we plan to roll out a new benchmarking offering that will fully incorporate our Hackett Performance Exchange or HPE technology and other innovations into our benchmark platform that will further improve and differentiate the unmatched value delivered from our benchmarking solutions.

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 to expand our market leading enterprise performance management or business analytics business. At the heart of the digital transformation era I just referenced to as business analytics, which now represents nearly 50% of our Hackett U.S. revenues.

We were fortunate to have invested heavily in this area for many years and has been one of the major reasons for our improved results. Our ability to assemble terrific talent and our unique ability to leverage our best practice configuration and organizational excellence intellectual property is responsible for this success.

We have used this capability to help our software partners uniquely positioned the business value of their software when it is optimally configured. Targeting the appropriate performance analytics using our best practice insight.

As we have helped them sell and optimally configure their software, we have been seeing increasing sales channel collaboration which has resulted in larger engagement and increased lead flow.

Our ability to define the right metrics, configure the software and provide full application and infrastructure, post implementation support, driven by our unique IP allows us to deliver a highly credible and differentiated solution.

Our long term strategy is to continue to build our brand by building new offerings and capabilities around our intellectual capital, and to serve client strategically and whenever possibly continuously. We believe that clients that leverage our IP are more likely to allow us to serve them more broadly.

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

Our goal is to use this unique intellectual property to establish a strategic a relationship with our clients directly or through strategic alliances and channels to further use this highly differentiated entry point to introduce our other capabilities.

Our long term goal is to be able to ascribe an increase in percentage of our total annual revenues to clients who are continuously engaged with us through our executive advisor or best practice advisory programs, and eventually through the Hackett Performance Exchange Offering and through the new programs that are leveraging our IP as a service alliance.

At the end of the quarter, our executive and best practice advisory members totaled 970 across 315 clients. These numbers exclude the new clients that we have been adding from our new IP as a service alliances.

Consistent with prior quarters, over 40% of our Hackett sales were also advisory clients which continue to support the leverage of this entry or IP wedge offering. As we announced last quarter we are now seeing new opportunities through new alliances and channels to use our IP to help others sell and deliver their offerings.

In the fourth quarter as we have previously mentioned, we launched a dedicated Hackett best practice advisory program for ADP Vantage HCM Solution. Our early indications from the ADP sales forces as well as from clients continue to be very favorable.

During the quarter, we continue to add new clients from this relationship and expect this activity to ramp further during the second quarter. Given our early success we now expect ADP will expand our offering this summer to a group of existing users that they expect to migrate to Vantage as well as the [ph] program for existing Vantage install base.

We continue to expect these activities to build throughout the year and become more noticeable to 2017 results along with our other alliances. 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 initial sales effort with an entry-level program with clients and early indications continue to be very favorable.

Last week we announced the completion and launch of our executive level program and we expect to complete and launch the managerial-level program by the end of July. At that time we will have our complete curriculum fully rolled out.

We have continued to build our pipeline with major global organizations and continue to get very favorable client reactions. The only thing holding us back is our need to complete our curriculums so that our prospects can fully see the value of our intended program.

Having said that, we now have over 50 clients who have already committed to apply their program and use the entry-level course as an assessment of our total curriculum, our total planned curriculum, I'm sorry.

We believe this ability to ramp throughout the year will accelerate as we roll out the remaining two programs, and now the remaining one program, and clients complete initial pilot programs. In the second half of the year, a key transition will be to gain larger and longer term commitments from companies currently in our pilot program.

This will enable us to exit the year with growing recurring revenue relationships that are noticeable to our results in 2017. We also expect to significantly increase and to increase the number of pilots and clients that we have throughout the second quarter.

All of these will happen before we complete our curriculum giving us a chance to then offer these longer term contracts and try to sign some of these longer term relationships with these larger organizations and to impact 2017 in a more meaningful way.

Lastly, we also announce our new joint marketing plan with Oracle that includes the sale of our Hackett performance exchange along with the sale of Oracle's new business intelligent cloud service.

As I mentioned last quarter this program has few clients, has continued to add clients, 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 and best practice IP leverage strategy allows us to increase our client base, profitability and revenue per client. It would also represent an increase in recurring revenue at much higher margins due to the way these services are provided and contracted.

Lastly, even though we have the client base and offerings to grow our business and we are seeing an increasing number of opportunities to further extend or reach new alliance partners. We continue to look for acquisitions that can strategically leverage our IP and add scope and scale or capability and can accelerate our growth.

In summary, we recorded another strong quarter. More importantly we are seeing that the improvements in investments we are making in our IP are sales channel and our expanded EPM or business analytics business, and IP as a service alliance focus will continue to drive sustainable structural growth.

As always, let me close by thanking our associates for their tireless efforts, and as always our attempt to stay highly focused on our clients, our people and the exciting opportunities available to our organization. More importantly, let me congratulate them on another strong quarter. Those conclude my strategic and market related comment.

Let me now turn it back over to the operator and open it up for Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question is from Jeff Martin from ROTH Capital Partners. Your line is now open..

Thank you. Hi, Ted. Hi, Rob..

Hi, Jeff..

Hi, Jeff..

Could you expand on give us a look at how the transition of incorporating HPE into the core platform happens, over what timeframe and is there a transition associated with that, what's the go to market strategy with that?.

All of the HPE, HPE will continue to be sold as a standalone offering and currently through the relationship with Oracle. Having said that, over the last two years, we have been working to integrate all of the innovation that came from HPE into our base benchmarking offering.

And a project that we have called quantum leap, to give you our internal name. And this is a way to basically, to really transition our benchmarking offerings into the digital era, to really facilitate data capture, capture data, provide analysis, provide access to all of the insights that we provide electronically.

So it's to really migrate our offering in our most critical offering which is our benchmarking solutions, really, into the digital era. So our belief is that our clients will see that new offering in the beginning of next year. We think this will facilitate and increase the interface for clients.

It should allow them and create a status for them to benchmark with us more frequently, to access our information more readily, to update their information with us more easily. So as you know the core to our intellectual property starts with the fact that we have a benchmarking offering that is second to none.

The client share information about their performance, the level of granularity that no other organization has.

From that granularity and that benchmarking insight, we then as we say, look under the covers and understand how companies are leveraging software, the way automated work flows are changing and the way organizational changes are taking around that leverage of technology which then becomes the best practice insight that we're now sharing in our IP as a service alliance.

So we think the transition should be a meaningful one for us, relative to our ability to gain more insight and work with clients more efficiently. Hopefully that will encourage clients to benchmark more frequently and to continue to allow us to gather more data, have more insight and be able to serve them more strategically..

The long term benefit of that, do you see that shortening the sale cycle or increasing the revenue per client, what do you think of that….

We think that will allow us to sell more benchmarks, deliver them more quickly, capture more data and as you know if you really go back to 2014, we believe that the more benchmarking that we do and data that we capture and granularity to help us drive insight that's unique to Hackett.

The smarter and brighter that we are as we then engage clients and share our IP. So I think it strengthens the organization at its core.

I think it facilitates our ability to increase the benchmarking revenue, but more importantly to gather more insight, share more insight which have really helped both downstream revenue and the IP as a service businesses that are so critical to our future growth and profits..

Okay, and then could you share some insight on the drivers of the sequential improvement that's expected in Europe? Is there anything internal or external that's driving that or is it more of a low hurdle from last year?.

Well, first of all the comps are more favorable.

But if you wanted a driver which in my script my COO actually encouraged me to put in so I will tell you, I mean our benchmarking activity has been increasing over the last 3 quarters and we have always believed that's an early indicator and that activity appears to be driving some of the improved results that we are now expecting in Q2.

I didn't want to, as you know I have been very cautious to talk about the turnaround in Europe.

We are happy it's going to be stable, slight up on a year-over-year basis and we hoped that an early indication that comes from our bench marking and wedge offering is a good long term indicator but we will continue to see that it holds for several quarters before we sneak to it more aggressively..

Okay. My last question and then I will get out of the way of people.

On the global delivery capability build out is that more for existing US clients or are you seeing international demands there and what does it build out to?.

Oh no, international is international so whether we are engaging a large multinational in the US or in Western Europe, I mean these are clients that have half of their operations in their rest of the world. So no, look our benchmarking and data.

So we want to have global delivery capability that matched the benchmarking capability and research and best practice insight capabilities, that's why we continue to look for ways to invest and improve the European performance because we do believe it helps the delivery of services that we have to International clients. .

Great. Thanks a lot guys. .

Thank you. Our next question is from Maurice [ph] from Grisham Securities, your line is now open. .

Hey Tedd, you discussed with physical lines that you have in place first the VP, then the senior [ph] it's in the second half of this year and when I see anything I mean the impacts on the income statements?.

Well, first of all it's already having an impact on an incremental basis but as you know these clients, these contracts that we are signing on all of the alliances are primarily multiyear clients which amortized over a period of time. As an example the majority of the contracts that we are signing with ADPR are five year contracts.

Where we originally thought they would be three, to give you some idea. But we have been cautious not to comment the impact in Q1 and Q2 are just not material for our results.

I want to continue to speak of the facts that the activity of ramping, the revenue is ramping and if it continues to ramp the way we see it and expect it to be throughout 2016 out exit run-rate in 2016 that we will have something that is noticeable in 2017. In the event if it materializes sooner, obviously we will take it.

But our focus is on extending the capability, making sure that we are launching all these things correctly so that the ramp happens and that we get to see it materialize in 2017 the way we believe today.

so the answer is yes, our materials don't know but the focus is on the ramp so we know that it is noticeable in 2017, so that continues and that's why I tried to provide some comments around number of pilots we are launching and see how that's increasing meaningfully.

And we are expected to continue to increase too and how the ADP relationship continues to get high marks and how we now expect for our opportunity for an ADP to expand as they launch their next fiscal year and this would start in this coming summer.

So again, things are progressing well and we have always been more modest and cautious about the HPE alliance but we are very bullish on our opportunities with ADP and CIMA as we are bullish on the fact that we would like to have other software partners added to our alliances before the end of the year if possible and we would like to introduce other certification offerings in areas outside of shared services and also if we can before the end of the year with other alliance partners.

.

Are you allowed to discuss how many clients you added with ABP in the quarter?.

I cannot..

Okay. One last question before I get back in queue. I want to make sure I heard this right.

Did you say recurring revenues were 50% of revenues or 15%?.

50%. Our revenue per client on the top 20 has just expanded very meaningfully here over the last few years. .

So recurring revenues is 1.5 times of total revenues?.

No, go back sorry I may have misheard your question. I may need to ask you to your question again..

Recurring revenues as a percent of all revenues?.

Current recurring revenues is 15% revenues, 18% of profit. .

Okay. Thank you..

Thank you. Our next question is from George Sutton from Craig Hallum, your line is now open. .

Thank you and 50% would have been very impressive. Yes, there would be an evaluation change.

So, relative to the wall of share discussion that you had, it certainly is impressive what you have been doing with your top 20, can you talk a little bit more specific in terms of some of things you are doing there, relative to that wall of share, what's driving your top 20 number and can you give us a sense below the top 20.

Are you seeing the things dynamic?.

Well, first of all the important thing goes back to the comments I made in my strategy and overview comments.

That there is a the clients are fundamentally having to rethink the way they currently operate their businesses and at the heart of that is the leverage of technology and you organize around that and at the heart of that is the opportunity for Analytics and information delivered in a manner and to a point that would dramatically change and improve the way businesses are run.

Well George those two things are at the heart of our business so we think that this is a significant and secular change coming with divisional transformation era we are talking about.

We want to cautious not to start changing the long term growth strategy of the organization but as you know we have been growing at the upper side of our revenue side for a while.

And we are looking at it and saying look companies need transform where and how to place those bets is becoming increasingly important and understanding what technology can deliver and to gain that value is critical and that's at the heart of the way we benchmark, research, deploy best practices, do our business transformation business.

Analytics is at the heart of the way clients, cloud and all of the new technology that is impacting our clients lives is growing and dramatically improving, active to information and analytics for organization and leads to the desire to drive the meaningful performance predictability and officially our intelligence and investments we have made in EPM and business analytics is at the core and I think that is the activity that we are experiencing.

We are really happy we are in the heart of this transformational opportunity but we are probably excited the more is the fact that we not only see those opportunities in our core business but we also see how meaningful our IP could be in the delivery and that change transformation happens with the industry.

The way software is sold in the way we could impacted or the way people are trained to examples of the ADP and CIMA relationships and we could play a significant role. So we are looking at all of these things and saying, hey look, before there is a meaningful opportunity I think the results been indicating improved performance.

I mean, 33% EBITDA opportunity that was only tempered by the increase in weighted average shares of 32% I think these are the results George we didn't have when we started the company and we were significantly smaller and the fact that we carry that on to Q2 we are saying look, we are in a good space, our brands are highly valued and respected in the ability to help companies accept those areas and our IP could be becoming increasingly more valued , demonstrates a strategic alliance partners that we can really help them differentiate from these services.

The combination of these things are exciting for our organizations. .

Got you. So I have a few questions on this buyback of Insider shares, I just wanted to give you a formal explain kind of the size, the pricing, the timing, any advisory's you may have used to help you from a legal perspective, any sense there would be helpful. .

Well the answer is that when we guided the first quarter we knew that the stock appreciation rights had been earned. And we knew that that would drive increased dilution to our first quarter results and guidance.

We also know that the increase in share value has an impact on the weighted average share calculation and also increases that number of weighted average shares outstanding and we were looking, we were thinking about that, listen, we've always said that we would use cash to acquire as a priority to buy back stock and to increase dividends to our shareholders.

We had increased the dividend to our shareholders at year end significantly, 30%.

We continue to look for acquisitions but as you know, a lot of the people who cover our stock, it has been rumored and commented that one of our larger shareholders had been moving out of their position here over the last several quarters and in fact, I think shortly after the end of the first quarter said that they had actually sold their entire position, I mean this was our single largest shareholder, just 18 months ago.

And when we heard of that activity and saw it in their filings, I encouraged all of the banks who cover us -- to the extent that those shares became available that we would be interested in seeing if they wanted to share that with the company or they would be shared with new shareholders.

We didn't know -- we actually meet with this large shareholder before the end of the quarter. We encouraged them to the extent that they plan to sell out of that position that they would offer that to us, they never reached out to us.

I'm sure that I have a new meaningful shareholder that I will be meeting shortly that took out the -- what looks like the most significant block that traded last quarter which I believe was 1.3 million shares that happened sometime in early March.

And once that opportunity was gone, our opportunity to buy back shares of that scale and therefore try to mitigate or reduce the number of shares outstanding has been lost. So when we consider the fact that the executive has launched a 75 program last summer.

And even though we consider to be very modest, somebody would always ask a little bit about those trades coming over the block once a quarter.

And when we looked at the fact that we would have considered a significant repurchase of shares, we then considered the opportunity to not only reacquire those shares to reduce share account standing but provide liquidity to some of the executives since they really were the only individuals that would have that kind of share volume and would do that for us.

As you know the last time we try to acquire large scale shares for the company was when we did the second dodge where we try to reacquire 5 million shares of the company, and as you know, only 972,000 shares were offered during that period.

So the combination of the fact that we wanted to reduce share count, that we're generating incredibly strong cash flow, that we had fully paid down our debt, that the executive could simply suspend their TB5 program and perhaps get some liquidity and sell those shares back to the company, we thought was optimal across all concerned.

The shares were priced at $14.77 which was a trailing five-day average to the day the Board approved it which was really even slightly lower than what it happened the previous or 20 or 30 days when we kind of looked back. So that's the way it was priced and that's the way it's being executed today..

Okay. I appreciate the details. Thank you..

No, I appreciate you asking the questions..

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

Let me again thank everyone for participating in our first quarter earnings call. We look forward to bringing you up-to-date again when we report the second quarter. Thanks again..

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