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

Good afternoon, everyone, and thank you for joining us to discuss The Hackett Group’s First Quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of The Hackett Group and myself, Rob Ramirez, CFO. A press announcement was released over the wires at 4:05 p.m. Eastern Time.

For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data discussed on this call that is not contained in the release on the Investor Relations page of our website.

Before we begin, I would like to remind you that in the following comments, and in the question-and-answer session, we will be making statements about expected future results, which may be forward-looking statements for the purposes of the federal securities laws.

These statements relate to our current expectations, estimates and projections and are not a guarantee of future performance. They involve risks, uncertainties and assumptions that are difficult to predict and which may not be accurate. Actual results may vary.

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

Thank you Rob and welcome everyone to our first quarter earnings call. As we normally do, I’ll open the call with some overview comments on the quarter. I will then turn it back over to Rob to comment on detailed operating results, cash flow as well as comment on guidance.

We will then go over our market and strategy related comments, then we will open it up to Q&A. This afternoon, we reported net revenues of $62.4 million and pro forma earnings per share of $0.22, both which were in line with our guidance.

After a slow start in January, as the quarter progressed, we picked up momentum during the quarter in both revenue and pipeline which is now driving our Q2 guidance. What is encouraging is this increased activity is occurring across both our Strategy and Business Transformation Group as well as in our EEA which is our ERP, EPM and analytics group.

Consistent with prior quarters, digital transformation and Cloud implementation initiatives continue to be the driving force for our organizations.

The investments we have made in our Quantum Leap platform are starting to pay off for our S&BT group as we are seeing an increasing number of multiyear benchmark transactions with increased opportunities for business transformations; engagement as well.

In our EEA group, we continued to see strong growth in our Cloud, or I’m now referring to NextGen application practices offset by the decline in our on-premise related implementations.

However, both the combination of our continued Cloud implementation growth and the decreasing exposure to the on-premise revenue will allow this group to be flat to up in Q2 as we communicated on our last quarters earnings call. Our SAP group, which will now be reported within the EEA group, came in flat which is better than we expected.

We expect this improvement to continue into Q2. International revenues, which exclude the discontinued REL working capital group were down 10% and weaker than expected. In Q4, as you will recall, we mentioned that we had experienced the cancellation of a meaningful project and the Europe portion of a large global engagement.

Although our European group will continue to hurt our performance in the second quarter, we have now replaced one of the large clients and expect Europe to be flat to up in the second half of the year.

On the investment side, we believe that the strategic investments we have made to fully digitize all of our IP, launching Quantum Leap, our next generation benchmarking platform followed with the introduction of our proprietary Hackett Digital Transformation Platform, or DTP as we call it, along with our Hackett Institute highly differentiate our offerings and our go-to-market and are important drivers of our growth.

Additionally, our investments in smart automation, along with strategic relationships are rapidly growing, procurement and EPM software providers will be key to our strategy in digital transformation momentum. Some of these relationships have yet to impact revenue growth but are important drivers of our overall growth strategy.

Last but not least, our successful introduction of our IP-as-a-service offerings through strategic partners, have further accelerated our position as a digital transformation and IP-as-a-service leader. On the balance sheet side, we continue to generate strong growth and cash flow from operations.

This allows us to increase our dividend, buyback stock and fund acquisitions while continuing to invest in our business as required. I will also comment further on strategy and market conditions. But before I do that, let me ask Rob to provide details on our operating results, cash flow and also comment on outlook.

Rob?.

Thank you, Ted. As I typically do, I will cover the following topics during this portion of the call. I will cover an overview of our 2019 first quarter results along with an overview of related key operating statistics.

I will provide an overview of our cash flow activities during the quarter and I will then conclude with the discussion on our financial outlook for the second quarter of 2019.

For purposes of this call, I will comment separately regarding the financial results of our Strategy and Business Transformation Group, or S&BT and our ERP, EPM and analytic solutions group, or EEA and the total company.

Our S&BT group includes the results of our executive advisory programs, benchmarking services and business transformation practices. Our EEA solutions group includes the results of our Oracle EEA and SAP solutions practices.

Please note that this differs from how we have commented in the past whereas we previously discussed SAP solutions separately from the other practices which have been grouped under Hackett.

In addition, please note that all references to gross revenues in my discussion represent revenues including reversible expenses and references to net revenues, represents revenues excluding reimbursable expenses.

As discussed on our fourth quarter 2018 call, we exited our European based REL working capital practice at the end of 2018 which has been accounted for as discontinued operations in our financial statements. All historical information discussed on this call has been recast to exclude discontinued operations for comparability purposes.

All recast historical data that excludes our European based REL working capital practice is posted on the investor relations page of our Website.

Additionally, references to pro forma results exclude non-cash stock compensation expense, intangible asset amortization expense and non-recurring adjustments and assumes a normalized long-term cash tax rate of 25%; all of which are detailed on the accompanying tables of our press release.

Acquisition adjustments are cash and non-cash compensation expense related to the portion of the purchase consideration for acquisitions that contains service-vesting requirements which are reflected as compensation expense under GAAP.

For the first quarter of 2019, our net revenues from continuing operations decreased by 5.6% to $62.4 million when compared to the prior year and which is in line with our revenue guidance range. Reimbursable expense ratio on net revenues was 7.7% for both the first quarter of Fiscal 2019 and 2018.

Reimbursable expenses are primarily project, travel-related expenses past through to a client and has no associated impact to our margin or profitability. Including reimbursable expenses, company gross revenues resulting from continuing operations were $67.2 million in the first quarter of 2019 which represents a year-over-year decrease of 5.6%.

Net revenues for our S&BT group, which again includes our executive advisory programs, benchmarking services and business transformation practices were $33.3 million in the first quarter of 2019; a decrease of 5.3% on a year-over-year basis; primarily due to lower international revenues and our slow January start as we had discussed last quarter.

However, we expect S&BT will be up strongly on a sequential basis in the second quarter of 2019. Net revenues for EEA, which again, includes our Oracle EEA and SAP solutions practices, were $29.1 million in the first quarter of 2019; a decrease of 5.8% on a year-over-year basis as expected.

As we discussed last quarter, we expected this group to be down in the first quarter because of the decline of on-premise revenues and our slow start in January. However, consistent with our comments from our Q4 call, we continued to expect that our EEA revenues will be flat to up in the second quarter of 2019 on a year-over-year basis.

Specific to our Oracle implementation practices within EEA, our COG revenue growth was in excess of 40% on a year-over-year basis resulting in the improved mix of Cloud to on-premise implementation revenue which is approaching 70%.

Our SAP solution practice revenues, now included within EEA, were flat when compared to prior year which was better than anticipated and it’s also expected to be flat to up in the second quarter of 2019 as compared to prior year.

Total international net revenues from continuing operations accounted for 17% of total company net revenues in both the first quarter of 2019 and 2018.

Our recurring revenues, which include our executive and best practice advisory and AMS groups, accounted for 20% of our total company net revenues and approximately 30% of our total company pre-tax practice profitability in the first quarter of 2019.

Total company pro forma cost of sales, excluding reimbursable expenses totaled $38.9 million or 62.4% of net revenues in the first quarter of 2019, as compared to $40.6 million, or 61.5% of net revenues for the same period in the prior year.

Total company consultant headcount was 979 at the end of the first quarter of 2019, as compared to 1003 in the previous quarter and 1016 at the end of the first quarter of the previous year.

The sequential and year-over-year headcount reduction is primarily due to the discontinuance of the REL working capital practice as well as the rationalization of resources resulting, for the migration, from on-premise software to Cloud-based resource requirements.

Total company pro forma gross margin was 37.6% of net revenues in the first quarter as compared to 38.5% in the first quarter of the prior year. This is primarily due to the decrease in European revenues and the slow January start previously discussed.

S&BT gross margins on net revenues, was 41.7% in the first quarter of 2019 as compared to 43.6% in the first quarter of the prior year. EEA gross margins on net revenues, was 32.9% in the first quarter of 2019 as compared to 32.8% in the first quarter of the prior year.

Pro forma SG&A was $14 million of net revenues in the first quarter of 2019 as compared to $14.5 million in the previous year and represented 23% and 22% of net revenues respectively.

Pro forma EBITDA in the first quarter of 2019 was $10 million, as compared to $11.6 million in the same period of the prior year and represented 16% and 17.5% of net revenues respectively.

Total company pro forma net income for the first quarter of 2019 totaled $7 million, or $0.22 per diluted share which was at the midpoint of our first quarter’s guidance. This compares to pro forma net income of $8.1 million, or 25% – $0.25 per diluted share in the first quarter of 2018.

Total company pro forma net income for the first quarter excludes an acquisition earn-out liability benefit of $1.1 million, cash and stock compensation expense of $1.6 million and intangible asset amortization expense of $299,000. Pro forma results also assume a long-term cash tax rate of 25%, or $2.3 million.

Our pro forma return on equity was 27% for the first quarter of 2019. GAAP diluted earnings per share was $0.22 for the first quarter of 2019 as compared to $0.23 in the first quarter of the previous year.

GAAP results for the first quarter of 2019 included $1.1 million or $0.02 benefit due to additional adjustments to the contingent earn-out liability relating to the Jibe acquisition and $0.02 unfavorable due to higher GAAP income tax expense when compared to the first quarter of 2018 GAAP results.

The company’s cash balances were $10.7 million at the end of the first quarter of 2019 as compared to $13.8 million at the end of the previous quarter.

This cash decrease in the first quarter was primarily attributable to net income adjusted for non-cash items which was more than offset by the payment of our second 2018 semi-annual dividend, the repurchase of shares in the open market and to settle employee tax obligations from net vesting activities and payments of incentive compensation bonuses made relating to fiscal 2018.

Net cash provided by operating activities in the first quarter of 2019 was $6.8 million, which was primarily driven by net income adjusted for non-cash items totaling $11.9 million, partially offset by decreases in accounts payable and accrued expenses as well as increases in accounts receivable.

Our DSO or days sales outstanding at the end of the first quarter of 2019 were 76 days as compared to the 75 days at the end of the previous quarter. During the first quarter of 2019, the company paid $5.4 million for its second semiannual dividend which was declared in 2018.

At its recent meeting, the Board of Directors declared the next semiannual dividend of $0.18 per share, an increase of 6% over last year, which will be paid in July of 2019.

During the first quarter, we repurchased 224,000 shares of the company’s stock at a total cost of approximately $4 million, including purchases from employees to satisfy income tax withholding triggered by the vesting of restricted shares. Our remaining stock repurchase authorization at the end of the quarter was $5.3 million.

Subsequent to the end of the quarter, we repurchased an additional 82,000 shares of the company stock for a total cost of $1.3 million. During the quarter, the company borrowed $1 million from its credit facility. The balance of the company’s total debt outstanding at the end of the first quarter was $7.5 million.

I will now turn to our guidance for the second quarter of 2019. The company estimates total net revenue for the second quarter of 2019 to be in the range of $67 million to $69 million. We expect both the S&BT group and our EEA group to be up strongly on a sequential basis and flat to up slightly on a year-over-year basis.

We expect S&BT’s revenues on a year-over-year basis to be adversely affected by lower international revenues in the second quarter. On a longer term basis, we expect international revenues to be flat to up in the second half of the year. The company estimates gross revenues to be in the range of $72.5 million to $74.5 million.

The gross revenue guidance includes an estimated 8% for reimbursable expenses. We expect our pro forma diluted earnings per share in the second quarter of 2019 to be in the range of $0.26 to $0.28. The high end of this range, this would represent a year-over-year increase in pro forma EPS of 4%.

We expect pro forma gross margin on net revenues to be approximately 39% to 40%. We expect pro forma SG&A and interest expense for the second quarter to be approximately $15.5 million. We expect second quarter pro forma EBITDA on net revenues to be in the range of approximately 18% to 19%.

We expect our cash balances, excluding the impact of share buyback activity to be up on a sequential basis. At this point, I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months..

Thank you, Rob. As we look forward, our focus really remains unchanged. We believe that digital transformation initiatives are driving our clients’ agenda and we intend to help our clients with – sort through all of those different initiatives that they are considering.

As I said repeatedly over the last several quarters or really probably the last couple of years that the rapid development in digital transformation which includes cloud applications, RPA, artificial intelligence is dramatically influencing the way businesses compete and deliver their services.

Traditional, sequential and linear based business models are changing to fully digital and dynamic automated workflows and events with enhanced intelligence. Digital transformation is redefining entire industries at an accelerated pace forcing organizations to fundamentally change and adopt these new capabilities in order to remain competitive.

In the U.S., these transformative technologies are resulting in increased activities as companies determine how to respond to the quickly changing competitive environment. We are seeing the growth in cloud and digital transformation engagement improved our growth prospects.

As our digital transformation and cloud engagements continue to grow and our on-premise revenue becomes a smaller part of our total company’s revenues, the complete benefits of our transition will become increasingly clear.

After our slow January start adversely impacted our Q1 results, we built momentum throughout the quarter which is favorable to Q2 and beyond.

Long-term strategies to continue to build our brand by building new offerings and capabilities around these digital transformation activities that I just defined, we believe that our benchmarking and best practice of intellectual capital allows clients to do so.

Specifically and relative to our global benchmarking leadership, as you know and you have heard repeatedly that we have launched a new service called Quantum Leap, our new digital benchmarking Software as a Service Solution. The new platform allows us to deliver more information with significantly less client effort.

It also allows our clients to leverage our IP and track transformation initiatives over the life of their respective effort. We believe we are just starting to see the benefits from this state of the art platform. We have also launched our digital transformation platform.

And this was to help further differentiate our unique IP and the related capabilities.

So by fully digitizing our IP and aligning proven technology and organizational solutions to help clients define and drive transformational change, we believe this platform is redefining how we deliver our consulting services and helping us differentiate our services to our clients.

We are leveraging our digital transformation platform or as we refer to it DTP, to expect – to expand and attract new alliance partners also. These partners that can utilize our unique benchmarking and best practice IP and help them differentiate and sell their software and service solutions we believe can benefit significantly.

This should allow us to further expand our IP-as-a-service offerings. We have now nearly a thousand clients with access to our IP platforms across our executive advisory and other IP-as-a-service offerings. Last year we expanded our ADP offerings by launching our new ADP Workforce Now platforms.

These programs increase our opportunities with ADP and continue to grow. Given the success of the program, we continue to believe we will attract other strategic partners to similar programs.

Lastly, even though we believe we have the client base and offerings to grow our business, we continue to look for acquisitions and alliances that strategically leverage our IP and add scope, scale and capability which can accelerate our growth.

In summary, even though the decline in our on-premise revenues and the slow January start impacted our Q1 results, it is really good to see the strong sequential growth in pipeline activity into Q2.

It demonstrates that the investments we are making in our digital transformation platform and related areas are key to our ability to resume our long-term growth and profitability goals in 2019.

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 great opportunities available within our organization. Those conclude my comments, let me turn it over to our operator and move into the Q&A section of our call.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Tim McHugh with William Blair & Company. Your line is open..

Yes. Sorry.

First, I guess can you just elaborate maybe on how the trends within the quarter changed and more so just kind of what you heard from clients, did behavior change, was there a particular part of the business that felt differently, I guess just trying to put a little more color behind I guess the improving trends later in the quarter versus what you were hearing and seeing early in the quarter?.

Well, Tim as you know, we were incredibly disappointed to see us really kind of give away so much of January.

And as you know, a significant part of that happened in the very first week, where we had a couple of extra holidays instead of one which somehow seemed to really throw off the kind of normal cadence that at least we experienced in January and have over the years. So, no, I mean, the progress throughout the quarter was pretty consistent.

We saw clients reengaging at a higher rate and we saw that reflected both in meaningful increase in pipeline, overall activity in dollars and also in the engagements that we closed and we’re able then to start into the quarter, which are now continuing into Q2.

So, we saw just a pretty natural increase under what I – I hate to say, because people – we should know all the answers, almost the weaker than expected start that we had in January..

Okay.

And then maybe just elaborate – the – on the Cloud side, can you talk about the size of the deals you’re seeing? Are you seeing that change at all? I did notice kind of the revenue from the top 1, top 5 customers increase, if that relates to that business or some other part of the business at this point?.

In this quarter, no, they probably related more to S&BT, but you’ll probably see some as we move into Q2, will be part of that as we report Q2 and move on. But, size of deals hasn’t really changed.

I think what really changed for us when we look at what we were trying to accomplish in ‘18 as what we decided we want to do as we exited ‘18 and going into ‘19 is, I think we’ve been a lot more judicious in the size of deals that we were pursuing inside of the ERP side of our business.

As you know that’s a business that was new to us, it came as part of an acquisition, which we’ve been continuing to try to bring the total Hackett influence there. We have seen an increase in the deal size that the acquired group was getting versus what they’re seeing with us.

So that’s extremely encouraging even though we haven’t, as we described throughout ‘18 as we were hunting for these very large deals, we’ve tried to stay away from some of the upper end, be a lot more selective and we’ve clearly increased the deal size there on the ERP side there, which has been part of the growth that you’re seeing in Cloud that Rob referred to.

On the EPM side – of the Oracle side, it really didn’t – the deal side didn’t change much. Having said that, as – if look at the pipeline versus the deals in the quarter, we have seen an increase in deal size in the pipeline on the EPM side as well, so we welcome that as well.

So, the increase in pipeline was not only in terms of number of deals, but the absolute dollars were increasing because of the opportunity of what we’re doing.

And, again, I want to differ that from anything we would have mentioned in ‘18 because I don’t think, again, we’re not trying to hit it out of the park, we’re trying to make sure that we’re playing to a size, which is really consistent with either a very strong relationship we have with clients and that credibility that comes with it or making sure that global reach is not something that simply ends up kind of getting X’d out at the very end of a selection process..

Okay, great. That’s helpful. Thank you..

[Operator Instructions] Our next question comes from Jeff Martin with ROTH Capital Partners. Your line is open..

Thanks. Good afternoon, Ted and Rob..

Hey, Jeff..

Hi, Jeff..

I was wondering if you could elaborate on – it sounds like you’re more optimistic on the near-term outlook on Quantum Leap.

And also looking for some additional color around the multi-year element to that?.

Well it’s –as you know, right, we’re a year plus into it now, so maybe that’s a little bit a part of the process, but we’ve seen increased activity in the opportunities within Quantum Leap.

We’ve seen increases in size within those deals and the number of clients that are taking the multi-year kind of, if you want to call it, initiative tracking element and either re-benchmarking element that comes with this new platform.

So, yes, we’re definitely – the increased activity makes us feel better and therefore if you read into that, yes, that’s what we want to convey and that’s factual..

Okay. And then I – I didn’t notice any commentary around the Hackett Institute and the certification program that you’ve invested, you know, some significant resources in.

Could you give us an update there?.

It’s continuing to make progress as we’ve built out this program, as we built out the programs. The reason I mentioned less is because the prospects for ‘19, as we set that out, are just not driven by the success of the institute even though obviously we’d like to grow it along with every other part of our business.

The prospect for ‘19 are being driven by large scale strategy and business transformation initiatives around all of the things I’ve touched on and our ability to compete for Cloud implementation or – well, I’m using the term Cloud or Next-Gen, because not everything in new generation or next-generation apps necessarily goes directly to the Cloud or to the infrastructure of the software companies.

So, that’s why I’m just using kind of a broader term. But as you know, that – those two areas are significantly larger and that’s why I kind of emphasize those. I then even move to IP as a Service of which the institute is part of.

When you look at that and you look at the things we’re doing with our digital transformation platform, Quantum Leap, IP as a Service offering, those things are just were some of our more significant and more profitable opportunities are now.

So, it’s not that we don’t love the institute, it’s just these other areas are providing greater opportunity at the moment..

Okay. And then my final question is around, you made brief mention of some of the smaller software start-ups out there and some interesting things they’re doing.

Is that something that you anticipate will – you’ll partner up with in the near future and start to impact your revenue growth?.

I do. I continue to believe that some of those new relationships will impact the second half of ‘19 growth. So yes, we’re focused on some of them.

Some of them have become significant to us, I mean, on the procurement side, we probably never mentioned just how significant, for example, our relationship with Coupa is, but, I mean, that’s been a great source of growth for us, as an example, and we don’t mention it as much just because the Oracle and SAP businesses are so much bigger.

But we’ve got relationships like that, that you can expect will be – we expect them to be important drivers of our growth in the second half of ‘19..

Very helpful. Thanks guys..

Our next question comes from George Sutton with Craig-Hallum. Your line is open..

Gentlemen, good afternoon, it’s Jason on for George. Just wanted to piggyback on the last question there, some of these start-ups that you’re working with more.

Can you handicap the progress you’re making there? Like, are you in advanced discussions with some of them, are some of them contributing, are there a lot more out there that you can be working with in a bigger way? So just wondering if you have any more detail you can provide?.

I guess probably the most significant thing I can say is that the relationship with some of them is clearly expanding and along with that we see pipeline activity expand, and as you see both of those things happen, you expect to see increasing deals close and manifest themselves into revenue that impacts growth in the second half of ‘19..

Okay. And touching on Quantum Leap, last quarter you talked about that as starting to impact differed revenue.

Can you just give us a timeline of the outlook for revenue contribution and how you expect that to kind of flow into the model over the next year?.

Go ahead, repeat your question? How we expect –.

Yes, just – well, the trajectory of the revenue model for Quantum Leap, because a quarter ago you talked about that as a bigger component of deferred revenue, so, what is the timeline for that flowing into revenue in a more meaningful way?.

What’s interesting, there is two components of it; one is clients, we are getting deferred revenues, so you’re right. We’re booking contracts that now have multi-year, so it is increasing deferred revenue.

But both the combination of the number of transactions, the increases in deferred revenue and don’t leave out the fact that there’s follow-on opportunity that comes from that naturally flows from helping clients identify and really, I mean, clearly evaluate the opportunity to improve and even then helping clients then drive those initiatives into a tracking system that only keeps that initiative top of mind.

The combination of all that functionality is – is just we have just been more successful with it and it’s not only going to – you’re not only going to see the benefit in Quantum Leap or benchmarking-related revenue growth, we expect to see some of that also play out as some of those opportunities that come in through Quantum Leap then become either a strategy and business transformation or EEA opportunity, which follows the, as we call it, the – art of the possible which we define with clients when they use Quantum Leap..

Great. Last one for me, and I apologize if I missed it.

Can you just give the mix on Cloud and premise, where that stands today? And then you talked about the improving pipeline of opportunities, can you maybe give us a sense of if you’re seeing that in any pockets for –that’s ERP, HCM, EPM, if there’s any strategic – any particular areas of strength?.

The answer is no, as I think I mentioned on our quote that the – in our – in my opening comments, that the increased opportunities were really across both strategy and business transformation and EEA. And I would say in EEA, they were both within ERP and EPM. So, no, it was across the board..

And to answer his question on the mix, on our implementation revenues, we said that basically the mix of cloud to on-prem is now approaching 70%..

In Oracle..

In Oracle, Oracle EEA..

Right. On the SAP side, the implementations there are probably – in pipeline are probably now 85:15, if you want to call it – their last version of on-prem versus S/4HANA..

Okay. Thanks, guys..

Our next question comes from Vince Colicchio with Barrington Research. Your line is open..

Yes, Ted, on the Oracle business, did you mention the pipeline percentage increase year-over-year overall and then for Cloud?.

No, I did not, but it was a – consistent with the kind of sequential improvement that you saw or better..

It was nice to see the SAP business start to respond.

Just curious, why do you think it’s – the SAP business seems to have rebound or started to rebound quicker than the Oracle business did to the impact from the Cloud transition?.

Yes, two dramatically different – two dramatically different –.

Situations..

Situations and the way they decide to go-to-market. So, for us, the transition was much smaller. We didn’t have a – we’ve had S/4HANA capabilities as a small and medium business in SAP from – we were an early adopter. So, we had the capabilities for a while.

We weren’t migrating from one business to the other, the transition for us happened naturally in that small and medium business space.

You – so to me the SAP opportunity was more channel kind of dislocation and incentives around their transition and S/4HANA Cloud and some of their other acquired assets that they go-to-market with like success factors and SAP Ariba and others, where Oracle for us, I mean, I – I hate to relive the last 2.5 years.

But you’ve got to remember, we – from middle to late 2016 through today, we’ve lost over $60 million of net revenues of Oracle EPM on-prem revenues. That’s a lot of revenue for a company of our size. So –.

It was dictated by the vendor – dictated by –.

Yes, it was dictated by their strategy. With that said, we – well obviously we’re still – just to give you an idea, I mean, our year-over-year decline in that Oracle on-prem business in the quarter was 51% – was over 50%.

With that said, as you – as we now have a larger Cloud revenue base and that revenue growth started growing over 40% and that other number now decreasing so significantly over the last 2.5 years, look the math is working in our favor. So, but two very different transitions between those two software vendors..

And then in Europe you had mentioned that you replaced the client loss with another client, I assume it’s a large client, and you’re expecting Europe to improve in the second half.

So, is the pipeline there broad-based or is it just 1 or 2 large clients?.

Well, Europe is a much smaller geographic market for us than the U.S. really. So, large clients there which can come in significant size are more important to them, where we just have dramatically much higher client counts.

But our brand can attract the large client in either markets, so therefore a large client there becomes more material to theirs and ours. So, yes, one of – as you know, we were impacted by two.

It’s nice to see that we got one, replaced one with another large one and since we know that, the prospects with that should improve through the balance of the year then that’s why we commented on the fact that we think our European prospects improve in the second half of ‘19..

And Rob one for you, what was capital spending in the quarter?.

$1.5 million..

Okay, that’s it from me. Thank you..

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

Thank you, operator. Let me thank everyone for participating in our first quarter earnings call and look forward to updating everyone again when we report the second quarter. Thanks. Thank you..

That does conclude today’s conference. Thank you for participating. You may disconnect at this time..