Hackett Group Inc (HCKT) 2011 Q3 法說會逐字稿

Welcome to the Hackett Group third-quarter earnings call. Your lines have been placed on a listen-only mode until the question-and-answer session. Please be advised that the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO, and Mr. Rob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss the Hackett Group's third-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 4.08 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 third-quarter earnings call. As we customarily do, I will start the call by providing some overview comments about the quarter. I will then turn it back over to Rob and ask him to provide some detailed comments on our operating results, cash flow as well as guidance. Rob will then turn it back over to me where I will make some market- related comments and then we will open it up for Q&A. So first my overview comments.

We are pleased we were able to report revenues of $57.9 million, which was at the midpoint of our guidance, with pro forma EPS of $0.09 which was at the high-end of our guidance. Equally important is that we have the opportunity to maintain this momentum into Q4, which should provide for solid year-on-year results, not only for the quarter but allow us to post strong improvements in pro forma EPS and EBITDA for the year. Our results continue to emanate from solid market demand servicing our advisory clients based more broadly and the cross-selling synergies from our EPM teams. We've also seen continued success from the investment we made in Australia a couple of years ago as those -- the Australian operations continue to post increases in revenue. Additionally both Oracle and SAP RP Solutions Group continue to show strong year on year improvement and build on the momentum that we established in 2010.

It is clear that our efforts to expand our brand permission from helping a client define its pro forma opportunity assisting that client in opportunity -- as well as assisting that client implement our recommendations continues. This is evident in both the US, as well as, the international markets that we serve. We are pleased how our investments in our associates, our intellectual capital, and our brand, along with our expanded capabilities that resulted from the Archstone acquisition have improved our performance.

We also have the opportunity to further strengthen our business model through the successful introduction of our new Hackett Performance Exchange offerings. I will comment about these opportunities in more detail in my strategic overview section of our call. Broadly speaking, we continue to believe that gradual but volatile economic recovery is underway. A current sovereign debt related volatility will not materially change the current demand environment.

The complexity and volatility of a global economy requires organizations to remain focused on improved decision-making, as well as operational excellence. We feel that our offerings are well aligned with these market conditions. I will comment further on the market conditions and specific go-to-market initiatives, but let me first ask Rob to provide the details on operating results, cash flow and also comment on guidance.

Rob?

Thank you, Ted. As I typically do, I will cover the following topics during our call. An overview of our 2011 third-quarter results, along with an overview of related key operating statistics; an overview of our cash flow activities during the quarter; and I will then conclude with a discussion on our financial outlook for the fourth quarter of 2011. 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 net revenues plus reimbursable expenses. Additionally, references to pro forma results specifically exclude non-cash stock compensation expense and intangible asset amortization expense and assume a normalized tax rate of 40%.

For the third quarter of 2011, total Company gross revenues were $57.9 million and at the midpoint of our quarter's guidance. This represents year-over-year growth of 11%. As I mentioned on our second-quarter call, the third quarter is seasonally impacted by the timing of the US holiday, as well as the normal increase in vacation taken in both the US and Europe, which unfavorably impacted available billing days on a sequential basis, which we estimated at 5%.

Total Company international gross revenues accounted for 24% of total Company revenues in the third quarter of 2011, as compared to 18% in the third quarter of 2010, primarily driven by growth in both European and Australian markets. Gross revenues for the Hackett Group which excludes ERP Solutions were approximately $47 million in the third quarter of 2011, representing a year-over-year increase of 9%. Gross revenues were essentially flat on a sequential basis.

Hackett Group annualized gross revenue per professional was $366,000 in the third quarter of 2011, as compared to $358,000 in the third quarter of 2010 and $377,000 in the previous quarter. The sequential decrease is primarily due to the seasonal decrease in available days. Our ERP Solutions group gross revenue totaled $11 million, which represented a year-over-year increase of 17% and a sequential decrease of 9%.

ERP Solutions hourly gross realized billing rate per hour was $134 for the third quarter of 2011, as compared to $143 in the previous quarter and $124 in the third quarter of 2010. This includes the impact of our offshore resources, which approximate nearly 40% of our ERP implementation resources. ERP Solutions consultant utilization was 74% for the third quarter of 2011, as compared to 86% in the previous year. The prior year benefited from strong go live activity in our SAP practice.

Total Company pro forma cost of sales, excluding reimbursable expenses and stock compensation expense, totaled $32 million or 62% of net revenues, as compared to $28.6 million or 60% of net revenues in the previous year. This year-over-year increase is primarily a result of ERP Solutions revenue mix. Total Company consult headcount was 746 at the end of the third quarter of 2011, as compared to 735 in the previous quarter and 676 at the end of the third quarter of 2010. The sequential increase was primarily attributable to increased hire activities in selected Hackett Group practices.

Total Company pro forma gross margin, which excludes non-cash stock compensation expense was 38% of net revenues in the third quarter of 2011, as compared to 40% in the third quarter of 2010. This year-over-year increase is primarily a result of ERP Solutions revenue mix. Hackett Group gross margin and net revenues was 40% in the third quarter of 2011, as well as in 2010.

ERP Solutions gross margin on net revenues was 32% in the third quarter of 2011, as compared to 38% in the previous year. This decrease was primarily driven by lower utilization on the year-over-year basis as we increased headcount throughout the year. Pro forma SG&A was approximately $13.6 million or 26.4% of net revenues in the third quarter of 2011 as compared to $13.3 million or 28.2% of net revenues in the third quarter of 2010. This 180 basis point decrease, as a percentage of net revenues, is primarily due to expanded SG&A leverage resulting from increased revenues. Total Company pro forma net income for the third quarter totaled $3.6 million, or $0.09 per diluted share, and was at the high-end of our guidance. This performance compares to pro forma net income of $3.3 million, or $0.08 per diluted share in the third quarter of 2010.

Total Company pro forma net income for the third quarter of 2011, excludes non-cash stock compensation expense of $1.3 million, intangible asset amortization expense of $204,000, and assumes a normalized tax rate of 40%, which amounted to $2.4 million. As of the end of the third quarter of 2011, the Company had approximately $43 million and $13 million of income tax loss carry-forwards remaining in the US and in foreign tax jurisdictions respectively. From a year-to-date perspective, total Company pro forma net income totaled $10 million, or $0.24 per diluted share, as compared to $8.4 million or $0.20 per diluted share in 2010. Pro forma EBITDA in the third quarter of 2011 was $6.5 million or 12.6% of net revenues, as compared to $5.9 million or 12.5% of net revenues in the third quarter of 2010. On a year-to-date basis, pro forma EBITDA has expanded 70 basis points from11.2% to 11.9% of net revenues.

Total Company GAAP net income for the third quarter of 2011 totaled $4.3 million or $0.10 per diluted share. This compares to $4.1 million or $0.10 per diluted share in the third quarter of 2010. The Company's cash balances were $19.6 million at the end of the third quarter of 2011, as compared to $19.5 million at the end of the second quarter of 2011. Net cash provided by operating activities for the third quarter of 2011 was offset by capital expenditures and stock buybacks. Net cash provided by operations in the third quarter was $1.7 million, which was primarily driven by operating earnings offset by the timing of the US payroll cycle and vendor payments, as well as an increase in DSO.

Capital expenditures for the quarter were approximately $820,000, primarily related to the development of the Hackett Performance Exchange. During the third quarter of 2011, cash was utilized to repurchase approximately 269,000 shares of the Company's common stock at an average price of $3.59 per share, for a total cost of $967,000. On a year-to-date basis, the Company has repurchased 1.8 million shares for a total cost of approximately $7 million.

At the end of the third quarter, the Company had approximately $2.5 million remaining in its stock repurchase program authorization. Our DSO, or day sells outstanding, at the end of the third quarter of 2011, was 60 days as compared to 57 days at the end of the second quarter of 2011. We expect DSOs at the end of the fourth quarter to approximate last year's fourth quarter DSO of 59 days. We expect our cash balances, excluding the impact of any stock buyback activities, to be up on a sequential basis consistent with our earnings guidance, as well as sequential reduction in Accounts Receivable balances.

Before I move to guidance for the fourth quarter of 2011, I would like to remind everyone of the seasonality of our business. Specifically the increased holiday and vacation time that is taken in the fourth quarter will decrease our available billing days by approximately 10% to 12% when compared to the third quarter. Despite this impact, we expect total Company gross revenues for the fourth quarter of 2011 to be in the range of $53 million to $55 million, or approximately 11% growth rate on a year-over-year basis.

Relative to pro forma diluted earnings per share, we expect the unfavorable impact of decreased available billing days to be partially offset by lower US payroll taxes resulting from reaching FICA limits and the utilization of vacation accruals. As such, we expect our pro forma diluted earnings per share in the fourth quarter of 2011 to be in the range of $0.07 to $0.09 per diluted share. Our pro forma guidance excludes amortization expense, non-cash stock compensation expense, and includes a normalized tax rate of 40%.

Sequentially we expect pro forma gross margins to be up slightly as we expect fourth quarter to benefit from the seasonal reductions in US payroll related taxes and the utilization of vacation accruals offset by higher costs relating to headcount increases and higher incentive compensation related accruals. As a result of our revenue guidance, we expect pro forma gross margin on net revenues to be approximately 38% to 40% in the fourth quarter. We expect to pro forma SG&A for the fourth quarter to be approximately $13 million. We expect Q4 pro forma EBITDA on net revenues to be in the range of approximately 12% to 14%. At the midpoint of our guidance, this should represent pro forma EBITDA of $24.5 million for fiscal 2011.

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. Looking forward at the macro economic level, we continue to expect to see solid demand in the US and international markets that we serve. As I previously mentioned, gradual but volatile global growth is favorable for our services. Geographically, we continue to expect healthy demand in the US, as well as Australia, and decent demand in Europe. This assumes that the current sovereign debt related volatility does not change our clients' buying behavior from what we've experienced to date. Correspondingly, we expect to see the pipeline and year-over-year revenue momentum that we built continue into Q4.

With that demand overview of the backdrop, let me now comment on some of our strategic priorities. As you know, we have always believed that if we can combine our global brand with a series of intellectual capital offerings that are used on a continuing basis, we can improve revenue growth along with the predictability and profitability of our operating results. Using unique intellectual capital delivered at an easy-to-use way, coupled with a broader transformation offerings will allow us to increase our client base, as well as increase revenue per client.

The best example of this strategy has been the revenue leverage that we have experienced from our executive advisory clients. We hope to achieve that same kind of leverage from the Hackett Performance Exchange offerings as well. As we have mentioned, we've worked harder during the last several years to innovate new ways to develop recurring revenue offerings that leverage our intellectual capital, as well as create an opportunity to serve clients more broadly.

In Q2 we initiated the sale of our first 2 SAP and Oracle-based automated dashboard offerings of our new Hackett Performance Exchange with very positive feedback from our clients. The initial marketing communication was to a targeted list of clients offering them to see the demo and included an invitation to become a charter member of our new Hackett Performance Exchange. Our goal is to rapidly grow our user base through aggressive introductory pricing in order to drive adoption. In Q3 we further augmented our go-to-market efforts by bundling the Performance Exchange as part of benchmarking and transformation initiatives that were addressing operating processes covered by our current modules.

We now have signed up 33 clients across 56 modules and we continue to build a pipeline that should allow us to continue to add to these numbers during the fourth quarter. Clients have the right to the 6 month trial period with the option to transition to a paid relationship with agreed-to pricing thereafter. As I previously mentioned, our goal is simple -- the more clients that use our offering increases the value of our database, as well as give us -- initial feedback on how best to enhance the overall experience and value of our offering.

As I have mentioned, this new offering, if successful, could enhance our business model by creating a powerful and possibly continuous relationship with our clients. Although there is much to learn about the new offering, we believe it could mean a new revenue stream, significant increase in data capture and operating insight, as well as a continuous way to monitor and benchmark a client's performance in critical business areas that could only help our consulting growth as well. Although the performance exchange launch efforts will be slightly dilutive in 2011, if we get the planned renewal behavior we expect it to be accretive in the second half of 2012. We believe that the Hackett Performance Exchange builds on our strategic desire to expand our brand permission and executive advisory relationship leverage.

With that in mind, let me comment on each in more detail. Expanded brand permission. We continue to believe that we should meaningfully increase our revenue per client. This will come by extending our brand permission from being the premier global benchmarking organization to our expanded global consulting capabilities. We continue to invest in improving our go-to-market messaging in an effort to help our clients understand why our benchmarking and best practice insight makes us unlike any other consulting organization.

Specifically, we must make sure that our clients know that we are every bit as good at helping them implement the outcome as we are at measuring and benchmarking their opportunity to improve. Let me then comment on the executive advisory client leverage. As you know, for several years we've said our long-term goal is to be able to ascribe an increasing percentage of our total revenue from clients who are continuously engaged with us. This has originally -- this was originally part of the executive advisory program, but this will be further augmented by the Hackett Performance Exchange relationships.

In Q3, our executive advisory members increased to 776 with client counts up to 229. Nearly 50% of our Hackett Q3 sales come -- came from our advisory client base, continuing to show its strong relationship leverage. Lastly, we continue to look for acquisitions and strategic alliances that can help us strongly leverage our existing intellectual capital to drive and accelerate our growth.

In summary, we are pleased with our continued improvement in our pro forma EPS, the momentum it provides for the fourth quarter, and what it means to our annual results. Our unique ability to combine proprietary intellectual capital with terrific talent, coupled with a strong balance sheet with ample cash balances and no debt, continues to bode well for our prospects. As always, let me close by thanking our associates for their tireless efforts and, as always, urge them to stay highly focused on our clients, our people, and the exciting opportunities available to our organization.

Those are my market overview comments. Let me now turn it over to Q&A.

Thank you. (Operator Instructions) Our first question comes from George Sutton of Craig-Hallum.

Thank you, good afternoon. I wanted to understand the move to bundle your performance exchange with benchmarking transformation. What is the logic behind that, and can you just give us a little better sense of what the plans are there?

Well, we want to use any method that we have, George, to grow our Hackett Performance Exchange user base and the adoption rate that we have. So, in benchmarking, it was very logical, when a client is benchmarking in related areas, to offer the client a chance to use the exchange as a way of monitoring their post-benchmarking performance. And to see the benefit of being able to use a dashboard product as a way of continuing to monitor their performance with a fully automated extraction tool. So, the clients love the idea of being able to get additional insight since they value the benchmark, we believe that they will see the ongoing value of the performance exchange dashboard, so we believe that that is a method that should allow us to continue to add clients.

The same strategy is being applied to transformation engagements. So, if we have a transformation engagement where a client is working on the order to cash of procure to pay area, which are the two modules that we're currently covering, we're offering that client the same opportunity. Would you like to be a charter launch member, allow them to populate our database for that six-month trial period, and then have the opportunity to continue after six months -- after that six-month trial.

So, today we will -- we obviously are prepared to offer that opportunity to non-clients, an individual or a client, an organization that would like to use the dashboard, populate our database and give us that feedback. We clearly want to make sure that we are offering that same opportunity to a new client where that information directly correlates with the area that they've asked our assistance in.

Okay. And could you confirm -- I think it's costing you about $0.01 a share per quarter. Is that -- I think that's a fair assumption. I'm curious, at what point do you define this as a success or an unmitigated success? Are you happy with 33 clients?

Yes, we're happy for 33 clients, but we'd like to have double that. We would describe it as a mitigated success once we -- in my view, once we have at least 100 renewed paying client members because that would mean that we're building a base. As you can imagine, the people that are participating in this launch, George, as you know, our client is a who's who of leading global companies. So, we believe that if we can get a significant number of these leading global companies to use this and see the value, that there is no reason for us not to be able to then continue that growth going forward.

Our hope, as you can imagine, if the client started launching the dashboard now in the latter part of the third quarter into the beginning of this fourth quarter, the first renewal activity will happen sometime in the second quarter of next year. We believe that the next six months will be a period where we will be getting significant feedback from these clients, telling us exactly how they value the product and where they believe changes could then further value the product.

Our goal is a combination of that -- those feature enhancements throughout that period, along with a database build during that period will then give the client an opportunity to look at the value that they're receiving versus the pricing that they've been offered, and hopefully they will believe that it has overwhelming value. We'll have a chance to validate that sometime in the middle of next year. I think then the latter -- the second half of next year will then dictate, in our view, a pace of growth both for renewal and adoption. And if that is successful, then in my view, a full impact of the offerings then should be visible in 2013.

Got you. Lastly for me, when we look at the broad macro environment -- the environment we're in is what I would define as a low-GDP environment where costs are keenly in focus. Is that the ideal environment for you? Would you like to see a little bit more strength in the macro economy? I'm just curious where you would position this?

Well, I guess optimal for us would be slow GDP growth where clients focus on productivity improvement and operational excellence remains high. But we prefer that you would have that environment without the -- let's say the possibility or the conversation of a potential double dip or something that can break the psychology of the client. I think what we've been very pleased in seeing, that even though the conversation relative to the -- for lack of broadly speaking, sovereign debt, all of the federal municipal austerity issues that we're facing here in the US have really not resulted in anything other than a solid environment for us. We've seen very good activity in the core business. As I said, we've seen decent activity in Europe; saw nice growth in Europe this year on a year-over-year basis.

So, yes, could it be better? It could always be better. But this kind of slow-growth, high-complexity environment, if we can continue to grow our business and our EPS at the rate we're going to grow this year for several years to come, we'd be very happy.

Perfect. Okay. Thanks, guys.

Next question comes from Morris Ajzenman of Griffin Securities.

Hi, guys. Let's follow up on those 33 signed clients that [aren't paying] at this point. And again, this is kind of tough because we don't know how many different items they choose off the menu, so to speak. Once -- assume they go forward, but hypothetically, all 33 clients, when it start becoming paying clients, what would you suspect that would be on a revenue run rate on an annual basis? Again, we don't know how much -- what items they choose and don't choose, but give us some sort of landmark to look at, assuming this becomes successful and you have 33 clients that become paying clients.

On a normalized basis, let's just say for the first 50 clients, we would expect that number to be -- oh, I don't know, let's say some number between $40,000 to $70,000, if you look at the number of modules per client that they're currently getting. If you then look at it as -- what we hope will be more traditional pricing, we would hope a client relationship across several modules will be closer to $100,000.

But as you know, these are just purely goals. We're in the prove-it stage, prove-the-value stage, demonstrate that value to clients, so we're focused in making sure that the experience -- that we're learning from the clients' reaction to the initial experience, that we're providing great feedback to the clients. So, even though -- as you know, we're excited about the prospects, we don't want to get ahead of ourselves.

George's early question on dashboard costing $0.01 per share per quarter, is that going to continue through the first quarter? Second quarter?

First, let me say that it has not ended up being $0.01 per quarter. It'll probably closer to probably $0.01 or less in the second half of this year. It's been totally driven on when we're actually launching the specific offerings. So, it's the go-live period; so that drives the depreciation, so that's being staged in.

And we would expect the -- we do not expect it to approach $0.01 per quarter in the first half of next year. We do not. But we do expect it to be -- maybe you could say half -- $0.005 per quarter, let's say this quarter and for the first two quarters of next year. That would be our best current estimate.

Thanks. And one last question, for Rob. Looking at your working capital sequentially between Accounts Payable -- and you touched on this in Accounts Receivable, that was a use of capital of $3.6 million. You mentioned that's going to reverse into the fourth quarter. Is that going to completely reverse and be a source of capital? How does that reverse itself into the fourth quarter and third quarter?

Well, we expect to generate net cash from operations in Q4. We'll still continue to have some CapEx dollars. And, obviously, we have an active stock repurchase program.

I'm just looking from working capital perspective.

Okay, working capital. So, working capital, we did generate $1.7 million from operations in the quarter. We would expect that to increase in Q4. I expect my Accounts Receivable balances, that ticked up by three days in DSO in Q3. I do expect that to reverse. I actually said that I would expect the year-end number to be around 59 days. The denominator that drives DSO fluctuates as revenues fluctuate, but I expect my absolute dollars in AR -- I expect some improvement in Q4, Morris.

Let me add to that, Morris. If our buyback activity was to remain the same in Q4 as it was in Q3, we -- whether you use mid-- whatever number you use, whether you use your number or the midpoint of the guidance we just provided, and you look at the improvement in receivables, you should see a very substantial increase in cash flow in the quarter unless we end up with very substantial stock repurchase activity.

Thank you.

(Operator Instructions). Our next question comes from Bill Sutherland of Northland Capital Markets.

Thanks. I'm back.

Glad to have you on the call.

So, Ted, are you -- you have an acquisition funnel that you're keeping an eye on these days? Or is that not really a focus at this point?

It's not a primary focus, but as you know, we continue to monitor a group of companies that we believe would be good fit for our organization. But, as you know, from time to time for -- the desire and the fit don't always match with timing and value relative to a seller. So, those things are very hard to predict.

So, no -- look -- acquisitions -- we continue to look for things that can really strengthen our organization. As I said on the call, leverage our intellectual capital, accelerate our growth rate, focus on IP as a way they go to market. And if we can find them and find a management team that's motivated like we are, where we can strike a fair price, we would continue to acquire.

Our primary focus is continuing to build on our SG&A leverage, improve our EBITDA percentage, successfully launch the Hackett Performance Exchange. We think if we can -- those two things, we think we can grow EPS and EBITDA nicely going forward. But if we could augment that with acquisitions, we wouldn't hesitate to do one.

Have you guys put out targets as far as the EBITDA upside that is possible -- I mean, I know it's probably a little tough, because you don't know how the dashboards are going to develop. But with the -- just the ongoing model with the executive advisory -- just the ability to keep driving the transformation businesses and working cap businesses, how far up does this model play, do you think?

Well, I think consistent with what I've said over the years, when you look at this year's net revenues, I think we're going to be somewhere very close to $200 million, George, depending on exactly where we finish the year -- $220 million-plus gross number. We've always believed that at $250 million of net revenue that we could expand our operating margin and EBITDA percentage pretty nicely. Depending on the mix of ERP to Hackett Group, we've always said that our hope would be that we'd be able to achieve a number that would be greater than $40 million of EBITDA over that period of time.

So, the question is -- how quickly can we get there? And can we get there with the quality of the margins that we currently have, and continue to leverage SG&A the way you've seen us do it over the last two years.

So, basically, at $250 million, you'd hope to generate $40 million.

We think we'd have a pretty good shot at it, yes.

Just one last one, just understanding the European situation. And what percent of revenue was it in the quarter, Rob -- Europe?

24% of our revenues were from international this quarter.

21% from Europe.

21% from Europe; 3% from Australia.

Thanks. I got on late. I apologize. I guess you said that the -- it sounded like that the sales force was coming back without any great concerns about the tone of the new business trends. I don't know exactly how to have you answer this. I am, like everybody else, unable to see my way into getting comfortable with Europe business holding up, and so maybe you can just help me with a little more color there. Remind me, how much was Germany, too. Thanks.

We don't provide that breakdown, Bill. We really limit it to the 21% and 3% that Rob just mentioned. But let me see if I can provide some additional color. I mean, when we look at our business, we're focused on a couple of things -- continuing to leverage our IP to see if we can drive higher margin businesses, and we believe that that is clearly capable under the series of offerings that are currently today under the Hackett Group -- if you want to call it a reporting band that we use on this call.

Having said that, we've been very pleased and -- to see the strong performance from our ERP solutions as well. But if we're allowed -- if we can continue to grow revenues with at least the gross margin blend we have today -- as you know, we've done better. When you looked at where we were -- where we exited '08. And you look at the SG&A leverage that's available to our business, we believe that we have the ability to continue to grow EPS and grow that EBITDA number here for several years to come.

Okay. And did you mention whether -- and this is the last one -- whether best practices research is the faster growing of the product lines, or is working cap also kind of keeping up with it?

No, our best practice -- our executive advisory business continues to grow nicely. No, it's actually being outpaced by some of the others. What we've loved about it overall is that our client renewal rates continue to be pretty solid.

More importantly, the revenue, as I've reported -- the amount of total sales that's emanating from that client base that's now, I guess, $229 million at the end of this quarter, continues to be at or around that 50%. So, we just love the relationship that we're seeing from somebody who decides to try our research advisory services, and then the total revenue then we're seeing from those clients as they have an opportunity to develop a relationship with our people and find out more about the broader Hackett offerings.

So, overall performance in that group has been pretty consistent with the rest of the group. The leverage into the sales has continued pretty consistently. It's been somewhere in that 40% to 50%. And the question that we're asking ourselves is -- given that -- if you want to call it loyalty that comes from that kind of relationship, if we were successful with the Hackett Performance Exchange, could we see that same loyalty from a Hackett Performance Exchange user? And could that also help us, then, have more visibility and help us with the predictability of the total growth of the organization. So, that's what we're trying to do right now.

Sounds good. Great. Thanks, guys.

Thank you for participating, Bill.

At this time, we have no further questions. I'll turn the call back over to Ted Fernandez.

Thank you, operator, and let me thank everyone for participating in our third quarter earnings call. We look forward to updating you on our fourth-quarter performance and annual results in early February. Again, thank you -- thank everyone for participating.

This does conclude today's conference. You may disconnect your lines at this time.