Hackett Group Inc (HCKT) 2014 Q1 法說會逐字稿

Welcome to The Hackett Group first quarter earnings call. (Operator Instructions)

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, Rob Ramirez, CFO.

A press announcement was released over the wires at 4:09 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 that are contained in our SEC filings.

At this point, I would like to turn it over to Ted.

Thank you, Rob, and welcome, everyone, to The Hackett Group's first quarter earnings call.

As we ordinarily do, I will kick off the quarter with some overview and highlights 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 details relative to our outlook. Rob will then turn it back over to me, so that I can make some market and strategic overview comments. And then, we will open it up for Q&A.

This afternoon, we reported revenues of $55 million and pro forma earnings per share of $0.08 in our first quarter of 2014, both at the high end of our revised guidance. As expected, strong North American Hackett performance was impacted by the continuing weak performance from our European operations. The year-on-year difference in our European results resulted in an unfavorable $0.06 pro forma variance in the quarter.

More importantly, during the quarter we made the necessary changes in our European operations to recapture our momentum and contribution in the region as quickly as possible. As a result of these actions and the Hackett North American momentum, as well as the application management services acquisition that we made in the quarter, we now have the opportunity to meet or exceed last year's Q2 results. This is in spite of having only neutralized the European contribution impact at this point.

Our results in the first quarter were as expected. Hackett North America, excluding the acquisition, grew an 11% rate, as we saw growth across nearly all of our groups. This quarter marked the third consecutive quarter of double-digit growth for Hackett in North America. This has resulted from an increased level of cross-selling amongst our practice groups.

Consistent with the fourth quarter, Europe was down significantly, as expected, with the weakness in Europe coming from longer sales cycle and deferred project conversions.

On the balance sheet side, we continue to be active with our stock repurchase program throughout the quarter.

On the investment front, we are pleased and very excited about the highly strategic and complementary capability which we brought on board with our EPM application management services acquisition of Technolab. This acquisition brings the ability to have a strategic and continuous relationship with our clients, principally our EPM technology clients, which is consistent with our Executive Advisory and Hackett Performance Exchange strategies.

Additionally, we continue to develop and attract talent, expand our brand in intellectual property, not only through the development of the Hackett Performance Exchange, but also through the data capture that results from our benchmarking and the research and inquiries that we support through our Executive Advisory offerings.

I will comment about these opportunities in more detail in my strategic overview section of our call. I will also comment further on market conditions and specific go-to-market initiatives, 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, I'll cover the following topics during our call: an overview of our 2014 first quarter results, along with an overview of related key operating statistics; an overview of our cash flow activities during the quarter; and I'll then conclude with a discussion on our financial outlook for the second quarter of 2014.

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, intangible asset amortization expense, results of discontinued operations, acquisition-related charges, restructuring charges, and assumes a normalized tax rate of 38%.

In terms of our first quarter results, for the first quarter of 2014, total Company gross revenues were $54.9 million, a 1% increase on a year-over-year basis. As we discussed during our previous call, overall revenue was impacted by the decline in European revenues.

Gross revenues for The Hackett Group, which excludes ERP Solutions, were approximately $46.1 million in the first quarter of 2014, or up approximately 6% on a year-over-year basis. Hackett US revenues were up 21%; 11%, excluding the Technolab acquisition. The increase in Hackett US revenues were offset by the 32% decline in Hackett European revenues.

Hackett Group annualized gross revenue per professional was $336,000 in the first quarter of 2014, as compared to $332,000 (sic - see Consolidated Statements of Operations - Q1 2014, "$329,000") in the first quarter of 2013 and $329,000 (sic - see Consolidated Statements of Operations - Q1 2014, "$332,000") in the previous quarter.

Gross revenue for our ERP Solutions group, which now consists of our SAP implementation group, totaled $8.8 million, a year-over-year decrease of 18%, as expected.

ERP Solutions' hourly gross realized billing rate per hour was $127 in both the first quarter of 2014 as well as 2013 (sic - see Consolidated Statements of Operations - Q1 2014). This includes the impact of our offshore resources, which approximate 45% of our ERP implementation resources at this time.

ERP Solutions' consultant utilization was 76% for the first quarter of 2014, as compared to 71% (sic - see Consolidated Statements of Operations - Q1 2014, "75%") in the first quarter of 2013.

Our recent acquisition of Technolab has continued to increase the portion of our revenues that relate to application managed services, for both the Company's SAP and Oracle EPM clients. These services are provided to clients on annual contracts, and our current annual contract value relating to these services is approximately $10 million.

For the first quarter of 2014, total Company pro forma cost of sales, excluding reimbursable expenses and stock compensation expense, totaled $32.6 million, or 66% of net revenues, as compared to $31.2 million, or 64% of net revenues, in the previous year.

Total Company consultant headcount was 770 at the end of the first quarter of 2014, as compared to 719 (sic - see Consolidated Statements of Operations - Q1 2014, "702") in the previous quarter and 702 (sic - see Consolidated Statements of Operations - Q1 2014, "719") at the end of the first quarter of 2013. The year-over-year increase is primarily due to the Technolab acquisition completed in the first quarter.

Total Company pro forma gross margin was 34% of net revenues in the first quarter, as compared to 36% in the first quarter of the previous year.

Hackett Group pro forma gross margins on net revenues was 33% in the first quarter of 2014, as compared to 36% in the first quarter of 2013, primarily due to the decline in European revenues.

ERP Solutions pro forma gross margins on net revenues was 32% in the first quarter of 2014, as compared to 36% in the previous year, primarily due to decreased SAP revenues.

Pro forma SG&A was $12.9 million, or 26% of net revenues, in the first quarter of 2014, as compared to $12.5 million, or 25.5% of net revenues, in the first quarter of the previous year.

For the first quarter of 2014, interest expense on borrowings under our credit facility was at $124,000, as compared to $142,000 of interest expense in the previous year.

Total Company pro forma net income for the first quarter of 2014 totaled $2.3 million, or $0.08 per diluted share, and was at the high end of our first quarter's guidance. This performance compares to pro forma net income of $3 million, or $0.10 per diluted share, in the first quarter of 2013.

Total Company pro forma net income for the first quarter of 2014 excludes restructuring charges of $3.6 million; non-cash stock compensation expense of $1.3 million; intangible asset amortization expense of $557,000; acquisition-related costs of $120,000; and assumes a normalized tax rate of 38%, or $1.4 million.

Decreasing income tax rates abroad, particularly in the United Kingdom, are having a beneficial impact on our effective tax rate on a consolidated basis. As a result of these declining rates, our effective pro forma tax rate has decreased to 38%. As European operating results return to historical levels, we would expect our consolidated effective tax rate to continue to decrease.

GAAP net loss for the first quarter of 2014 was $2 million, which includes restructuring charges of $3.6 million, non-cash stock compensation expense of $1.3 million, amortization expense of $557,000, and acquisition-related costs of $120,000.

Restructuring charges taken in the first quarter of 2014 were approximately $3.6 million. These charges primarily related to severance costs, as we reduced staff and exited facilities as part of a plan to respond to market changes commensurate with demand across Europe.

Pro forma EBITDA on net revenue in the first quarter of 2014 was $4.5 million, or 9.2% of net revenues, as compared to $5.7 million, or 11.7% of net revenues, in the first quarter of 2013.

The GAAP diluted loss per share was $0.07 for the first quarter of 2014, as compared to diluted earnings per share of $0.06 in the first quarter of 2013, as a result of the restructuring charges taken in the first quarter of this year.

At the end of the first quarter, the Company had approximately $23 million and $24 million of income tax loss carryforwards remaining in the US, which includes both state and federal taxes, and in foreign tax jurisdictions, respectively. As a result, for tax purposes, we will continue to have the ability to offset most of our US and international tax liabilities.

The Company's cash balances were $13 million at the end of the first quarter of 2014, as compared to $18 million at the end of the fourth quarter of the previous year. This cash decrease in the first quarter was primarily attributable to net cash used from operations, cash utilized for the Technolab acquisition, and cash utilized to repurchase common stock, all of which was offset by borrowings under our credit facility.

Net cash utilized by operating activities in the first quarter was $8 million, which was primarily driven by decreases in accrued expenses relating to the timing of US payroll-related items and the payout of 2013 performance bonuses; decreases in accounts payable, due to timing of vendor payments; and increases in accounts receivable commensurate with revenue increases.

Our DSO, or days sales outstanding, at the end of the first quarter of 2014 was 61 days, as compared to 59 days at the end of the fourth quarter.

During the quarter, we announced the acquisition of the US, Canada, and Uruguayan operations of Technolab International Corporation. Closing consideration included approximately $3 million in cash and $1 million in stock.

During the quarter, we purchased approximately 716,000 shares of the Company's stock at a cost of $4.3 million, or $6.06 per share. Subsequent to the end of the first quarter, the Company repurchased another 332,000 shares for $2 million, at an average cost of $6.04 per share. Our remaining stock repurchase authorization is currently at $3.3 million.

I'm now going to turn to our guidance for the second quarter. We expect total Company gross revenues for the second quarter to be in the range of $56 million to $58 million, with a reimbursable expense estimate of 11% on net revenues. This compares to a prior-year gross revenue amount of $59 million, with a reimbursable expense ratio of 12.6% on net revenues.

We expect North American gross revenues to be up sequentially, by approximately 6%, with Hackett North America estimated to be up approximately 7% and ERP Solutions to be flat. Hackettt International revenues primarily derived from Europe are expected to be up sequentially, by approximately 5%.

As a result, we expect our pro forma diluted earnings per share in the second quarter of 2014 to be in the range of $0.12 to $0.14.

Our pro forma guidance excludes amortization expense, non-cash stock compensation expense, restructuring charges, acquisition-related costs, and includes a normalized tax rate of 38%, a decrease from the historical 40% normalized rate, as I previously discussed.

Sequentially, we expect total Company pro forma gross margins on net revenues to improve, as we expect the second quarter to benefit from a higher revenue per professional and small seasonal reductions in payroll-related taxes and vacation accruals. As a result of our revenue guidance, we expect pro forma gross margin on net revenue to be approximately 37% to 38% in Q2.

We expect pro forma SG&A and interest expense for the second quarter to be approximately $13 million, or flat sequentially.

We expect second quarter pro forma EBITDA on net revenues to be in the range of approximately 13% to 14%.

We expect our cash balances, excluding the impact of debt repayments and share buyback activity, to be up on a sequential basis consistent with our earnings guidance.

At this point, I'd 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, we expect a continued year-over-year growth from our North American Hackett business across nearly all of our groups. Internationally, although there are expectations for improvement as the year unfolds, we expect demand to remain adequate but characterized by inconsistent decision making as compared to the US.

We believe that some of our international volatility, as I discussed last quarter, may be as a result of the limited solution offering that we have in Europe when compared to the US. A key part of our solid US activity, or North American activity, is due to the very strong enterprise performance management and business intelligence capability, which now represents nearly 50% of our total North American Hackett revenues.

Our new European leader specializes in the EPM area and should help us build out this capability in Europe. Our plan is to expand into this area in Europe throughout 2014. We believe by more closely mirroring our US capabilities in Europe and building on our EPM and business intelligence strength globally, we can improve our ability to grow in Europe and also further strengthen our global delivery capabilities, which are important for large, multinational engagements.

Beyond our immediate focus in Europe, our strategy is to continue to build our brand by building dedicated skill around our unmatched intellectual capital in order to serve clients strategically and, whenever possible, continuously. We believe that clients that leverage our intellectual capital are more likely to allow us to serve them more broadly. Intellectual capital-based services enhance our opportunities to serve clients remotely, continuously, and more profitably.

Our goal is to use our unique intellectual capital to establish a strategic relationship with our clients and to further use that entry point to introduce our business transformation and technology consulting capabilities. This strategy will allow us to increase our client base, profitability, and revenue per client.

The best example of this strategy continues to be the revenue leverage we have experienced from our Executive Advisory client base. Specific to that client base, our long-term goal is to be able to ascribe an increasing percentage of our total annual revenues to clients who are continuously engaged with us through our executive advisory programs and now with our recent acquisition, our application management services, and eventually through our Hackett Performance Exchange.

At the end of the year, our Executive Advisory members totaled 865, across 273 clients. Consistent with prior quarters, over 40% of our Hackett quarterly sales were also advisory clients, continuing to show its strong relationship leverage.

On the Hackett Performance Exchange front, we continued to build out our dedicated sales group and pipeline. We expect this investment to allow us to build client adoption of our solution during the year and help further validate the value of this offering.

As I've repeatedly mentioned, this is an ambitious new offering but, if successful, it could help enhance our business model by creating a powerful and possibly continuous relationship with our clients. And although we continue to learn how best to sell the leverage of these offerings, we now believe that this new platform will become a critical component of all of our benchmarking offerings over the next several years.

Lastly, even though we believe that we have the client base offerings and market coverage to grow our business, we continue to look for acquisitions and alliances that can add scope, scale, or capability and help us accelerate our growth. I would also add that our efficient access to debt further encourages this focus.

In summary, we've reported less than optimal quarterly results given our weakness in Europe. However, we are optimistic about our prospects, given our strong guidance and the changes and investments we are making in Europe to accelerate our success in that region.

More importantly, we continue to believe that our unique ability to combine proprietary intellectual capital with terrific talent to help our clients optimize their performance, especially in this complex demand environment, allows us to remain top-of-mind with leading global companies and bodes 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 opportunities available to our organization.

Those conclude our formal comments. I will then turn it back over to the Operator and move to the Q&A section of our call.

Thank you. (Operator Instructions) Morris Ajzenman, Griffin Securities.

Ted, at the beginning of the call here, you said Europe hurt, and I think you said $0.06 a share. Do you have the impact last year in the first quarter, what the negative impact, if there was, from Europe (multiple speakers)?

The negative impact in the fourth quarter was actually approximately $0.07. In the first quarter, it was approximately $0.06, unfavorable.

Okay. So, on a year-over-year basis, the impact was the same, hurting earnings by $0.06 per share.

That is correct. That is correct.

Okay. And now, you did say that Hackett Europe revenues were off 32% in the first quarter. I think you said that.

That is correct.

Right.

Can you give any sort of guidance? What happened sequentially? What's the environment? I know that you've done a lot of cost cutting, and we can talk about that some more. But what's happening in the landscape in Europe? Is there going to be any improvement where that decline might be lesser of magnitude going forward?

We expect it to be up sequentially, Morris. So, hopefully, I'll say we've stabilized that part of the business. We think all of the changes that we're making -- leadership, offering focus -- are strengthening our opportunities in Europe.

And as I've said in previous calls, we've been highly profitable in Europe and, clearly, we're disappointed with the impact that it's had on our results in the last two quarters. We've neutralized that year-on-year impact going into Q2. Expect it to be up a little bit sequentially. And we hope to build out from there.

But as you know, when we actually experience it, then I'll be able to speak to it.

All right. And again, $0.06 loss per share for Europe in this quarter. You took this restructuring charge. Would you care to guesstimate what the loss in Europe will be going forward? How much of that will be diminished (multiple speakers)?

It was an unfavorable impact and, yes, Europe was actually not profitable on a fully-allocated basis in the quarter. Now, we would expect that the changes that we have made will make Europe profitable in Q2.

Okay. I'll jump back in queue.

And that is part of the reason why you're seeing our --. It's a combination of things but, clearly, the changes we've made in Europe and neutralizing that contribution impact has made a big impact in our Q1 to Q2 guidance, but also the fact that we expect to continue the North American Hackett demand to continue, and we expect that group to be more profitable also as we go into Q2.

Thank you.

(Operator Instructions) Bill Sutherland, Emerging Growth Equities.

I was wondering if we could, Ted, get a little more color on the Performance Exchange: where you are with the marketing, the sales group, and what the pipeline is -- how it's building?

Bill, I hate to be overly hopeful, and my investors know this as well, even though obviously we believe in the prospects for the offerings.

I think what I would say at this point is that we are building a pipeline. We continue to see the interest in the offering build. And I'd like to be able to provide more background than that once we actually see meaningful client adoption and sales kick in.

But I would characterize it as that we build momentum during the quarter and hope to see that realized more fully as we go into -- in Q2.

I have to believe there's nothing assumed for Q2 as far as --. Well, you would have --.

That is correct. We will assume that the investments in that offering will cost us money throughout 2014, and hope that one day it will catch up with us and pass right through our current spend and demonstrate its capability. But we'll have to wait until then to be able to share that with you.

I guess it'd be helpful if we just had a little bit of color, though, in terms of how you think the booking picture might go, just based on the level of discussions that are going on right now?

It's just too early, Bill, and I consider it immaterial to Q2 guidance. So, again, I don't want to (multiple speakers).

The world doesn't stop (multiple speakers).

I think that -- I think I'm giving you enough by saying that client interest is increasing, pipeline is increasing. And we hope that this kind of activity allows us to achieve the 2014 goals which is to really prove a clear adoption of the offering by a nice group of significant clients and then to be able to then go forward from there.

Okay. And what kind of organic growth number is in the guidance, Rob?

For Hackett? Or, for ERP?

Well, ERP wouldn't be impacted by --.

He said ERP would be flat. We expect ERP to be flat. We expect Hackett ex-acquisition, Hackett North America, to be up approximately 5% to --.

7%.

--7%. And what am I leaving out?

International will be up sequentially, 5%. Basically, we've --.

And year on year?

Year over year is flat.

Oh. So, that sequential growth you gave was ex-Technolab.

No, it included Technolab.

Which one?

The sequential growth (inaudible).

Oh. So, that's what I was curious about. Well, Technolab is running about $2-plus million?

Correct.

Okay. And I can back into that.

Yes. If you look at the fact that we reported Hackett 21% up including the acquisition and 11% excluding the acquisition, you can back right into that number, Bill.

And it was interesting you provided an annual contract value, which I haven't seen for a while, for EPM. I guess --. Was it just for EPM?

That's for [AMS].

Just for Application Maintenance Services, which is primarily the EPM technology application management services that are being provided through our acquisition. But it also, for lack of a better term, discloses the application maintenance services revenue that is part of our SAP-ERP group.

So, the reason that we want to show that is clients continue to have an interest in those parts of our business where we have recurring revenue. We wanted to provide some visibility to that, especially since we believe as a result of the acquisition -- our expectation is that we will have an opportunity to grow that amount nicely over the next several years and, probably equally important, that it provides a continuous relationship for our technology clients, as well.

In everything we've been doing, whether it's been executive advisory services, Hackett Performance Exchange, and now the application management service investments that we've made, we want clients to see that part of our business and how we're investing and growing that as well, because we think it will be meaningful to long-term sustainable growth and profit.

Yes, I agree. And I wondered if you were to aggregate all of the multi -- at least annual contract revenue, what kind of ACV you'd have?

Well, we're giving it to you in the application management services. We haven't provided it to you in the executive advisory area. And perhaps we should reconsider that when we go forward.

Right, because I think it's an important element of your -- the revenue quality, obviously.

(multiple speakers) a nice portion of our revenue, obviously, because of those two areas. And hopefully, eventually through growth of Hackett Performance Exchange, that will have that recurring element. And more importantly for us, what we're seeing is that those clients that use those services appear to be more loyal in terms of allowing us to broaden their total revenue relationship.

So, it's important across two fronts.

Based on the steps you took in restructure -- and this will be my last question; I'll get back in queue -- the steps you took in Europe, as far as downsizing, what is the capacity, I guess, at this point for revenue generation over there?

We still have capacity, and we're also building out the EPM group. So, part of the, if you want to call it, retrenchments will be somewhat of a reallocation of resource as we invest in the EPM growth in Europe throughout the year. So, I assure you that we'll be able to keep up -- I hope to have the problem of keeping up with the opportunities.

What we didn't want to do is expose our P&L to the kind of quarterly impact that we experienced the last two quarters. I just decided that it just wasn't warranted.

Sure.

And we needed to make changes not only to reinvest, but to ensure that it did not diminish the strong performance and profitability outside of Europe at the moment.

Are the early indications from your new guy in Europe that it's a selling cycle that probably you won't see the real pickup in bookings until, like, fourth quarter? Or, could it be sooner?

Well, we hope that it happens throughout the year, but we don't know that at this point. You've got to remember that Europe has been volatile historically, or more volatile than the US historically, but a strong, strong contributor to our overall profitability.

So, there is just --. In our mind, if our execution is on point, our offering is right, there should be just no reason why Europe doesn't return to closer to its historical level of contribution. We're quite a bit off that at this point.

Right. Okay.

George Sutton, Craig-Hallum.

It's Jason, on for George. I got on a little late. So, I apologize if you've already addressed this. But I just wanted to see if you could spend some time talking about Technolab and if there's anything in that that you can leverage to improve your positioning in the Europe environment?

And then, also, if you could talk about other M&A opportunities you're looking at or what you're currently seeing in the market?

Well, I would say one is the Technolab capabilities does have a global client base and, in fact, significant clients in Europe. So, it should allow us to grow that client base that we're serving out of Uruguay, both from North America as well as western Europe. So, it does do that.

All of those AMS services, at least for now at the moment, we're reporting as North American revenues, even though that business does have some portion of its revenues that are outside of North America.

But it clearly has a global client base. It should help us with improved execution and access in Europe.

More importantly -- and I think it's worth mentioning -- we have a strong transformation and EPM technology implementation group. By adding this, we think, very strategic, very capable post-implementation support across both applications and infrastructure in an area that clients seem to struggle with, we think it's going to give us a chance to grow all aspects of EPM.

So, we have very high hopes for that business, and can tell you that even just in the recent quarter we've signed several new clients just since we closed the acquisition. So, it's hard for clients to find great Hyperion or Oracle EPM support these days, and we think the capabilities that came with Technolab are as good as anyone, and they come at a very attractive price point, and they come with a significantly lower turnover than we experience today in India.

So, both high-growth area in that EPM/BI area. Very strong dedicated capability in an area that we're doing well. And an area we want to invest in Europe with. So, it's an important acquisition, and it's a great group of people that came on board with that acquisition.

Right. And it accelerates your EPM entry into Europe, correct?

It does. It will allow us, again, since we're serving and can offer those services to European clients remotely. Yes, it allows and accelerates our entree into Europe. You're correct.

Okay. And then, just lastly, any comments you can make on the M&A front? Anything different that you're seeing?

Simply just that there is always activity. But as you know, we're always cautious because it's a combination of things. It's culture, strategic fit. It's value. A lot of things have to come together for those things to happen.

But we continue to be aggressive at making sure that we know what's out there. I think people know that we're someone that can move quickly if we like a company that we think strategically fits in with us.

So, it continues to be a priority for us. Maybe that's the best way to say it.

Okay. That's perfect.

Morris Ajzenman, Griffin Securities.

Again, this time turning to North America, you had the third straight quarter of double-digit growth, where it was up 11%. And I think when you were giving more detail -- I'm not sure if this is sequentially or year over year -- you're expecting Hackett North America to grow 7%. Is that sequentially or year over year?

That was sequential.

Sequential.

Correct.

Any comment, any thought? Will that double-digit rate of growth continue?

We don't know, but I think --. It's core to our business. We sincerely hope so. But we provide guidance out one quarter, Morris, and we want to make sure that we're not doing anything that's changing that.

Well, the reason I ask is that the first quarter GDP numbers came out a few days ago, and it was a rather flattish quarter. And whether it was weather or whatever. Things appear to be improving on the landscape for [many, many] companies.

How did your pipeline look exiting the first quarter into the second quarter? Again, you're giving a sequential number, but is there a pickup in discussions with clients? How do things play out in Hackett --?

(multiple speakers) going into Q1 was good. I think the difference is --. The biggest thing with Q1 is how quickly clients initiate programs when they come off their vacation, especially if it's something --. It could be funded, but it's --. I would say the biggest challenge is making sure that clients kick those projects off as quickly as possible.

But the overall activity in North America, as I said in my comments, remains solid, and we expect growth in across virtually all of our groups. So, whether that results in double-digit or not, the way we've had three quarters, we don't want to get ahead of ourselves. But suffice it to say that we're growing sequentially, and we surely hope it continues that way.

Thank you.

Okay. I guess those concludes the Q&A portion of our call. I'd like to thank everyone, again, for participating in our first quarter call and look forward to updating everyone again once we report the second quarter.

Thank you, again, for participating in the call.

This concludes today's conference. Thank you for participating in today's conference call. You may now disconnect.