HACKETT GROUP, INC. Q2 FY2025 earnings call

• Gen AI innovation: Significant enhancements to AI XPLR and ZBrain Gen AI platforms, with Gen AI-enabled engagements driving growth in the Global S&BT segment. - Partnership: Announced partnership with Celonis to accelerate Gen AI growth. - Segment performances: GSBT up 5% y/y (excluding OneStream, up 10%), Oracle down 7.5% y/y, SAP up 11% y/y. - Investments: Development of AI XPLR version 4, acquisition of LeewayHertz, and launch of Accelerator to improve technology implementation efficiency. - IP integration: Integration of Gen AI into executive advisory and consulting offerings, leveraging proprietary IP.

Global S&BT Segment: Revenues before reimbursements were $43.6 million for the second quarter of 2025, an increase of 5% compared to the prior year. The strong revenue growth from Gen AI consulting and implementation offerings was partially offset by weakness in OneStream implementation offerings; excluding this, the segment was up 10%. Oracle Solutions Segment: Revenues before reimbursements were $20.5 million for the second quarter of 2025, a decrease of 7.5% compared to the prior year. This was due to the post-collab wind-down of a large engagement. SAP Solutions Segment: Revenues before reimbursements were $13.5 million in the second quarter of 2025, an increase of 11% compared to the prior year, driven by implementation services from increased software sales. Total Company: Revenues before reimbursements were $77.6 million, an increase of 2% over the prior year. Adjusted gross margin was 42.8%, adjusted EBITDA was $16.1 million.

• Third quarter revenues before reimbursements expected in the range of $73 million to $74.5 million. - Oracle Solutions segment revenue before reimbursements expected to be down over 20% y/y; Global S&BT and SAP Solutions segments expected to be up y/y. - Restructuring charges of approximately $1.5 million to $2 million in the third quarter related to severance costs. - Adjusted diluted net income per share expected in the range of $0.36 to $0.38 for the third quarter.

• Extended client decision-making in Oracle Solutions segment delaying revenue replacement of large post-go-live engagements. - Competition for experienced executives with high technology agility. - Foreign exchange fluctuations impacting adjusted SG&A expenses.

Q: George Sutton asked about XPLR 3.0, LeewayHertz, ZBrain and the opportunity impact.

A: Ted Fernandez responded that AI XPLR licensing not yet released but innovation impressive; Gen AI-related revenues up in Q2.

Q: Jeff Martin asked about OneStream and Gen AI application examples.

A: Ted Fernandez said OneStream's comp peak in Q3, impact to be eliminated; Gen AI applications in customer service, revenue management, and GBS operating improvements.

Q: Vincent Colicchio asked about labor resources, utilization, and XPLR vs competition.

A: Ted Fernandez stated labor resources are sufficient with Gen AI involvement in over 50% of new engagements; version 4 of XPLR received excellent feedback from leading AI enterprise software company.