The Hackett Group Management Discusses Q4 2013 Results - Earnings Call Transcript

| About: The Hackett (HCKT)

The Hackett Group (NASDAQ:HCKT)

Q4 2013 Earnings Conference Call

February 24, 2014 5:00 PM ET

Executives

Roberto Ramirez - EVP, Finance and CFO

Ted Fernandez - Chairman and CEO

Analysts

Morris Ajzenman - Griffin Securities

Jason Kreyer - Craig Hallum

Operator

Welcome to the Hackett Group Fourth Quarter Earnings Call. Your lines have been placed on 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.

Roberto Ramirez

Thank you, operator. Good afternoon everyone and thank you for joining us to discuss The Hackett Group's fourth quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and Chief Executive Officer of The Hackett Group; and myself, Robert Ramirez, Chief Financial Officer.

A press announcement was released over the wires at 4:25 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 Q&A 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.

Ted Fernandez

Thank you, Rob, and welcome everyone to our fourth quarter earnings call. As we customarily do, I will provide an overview of the quarter, and then turn it back over to Rob, so that he can go through a detailed review of our operating results, cash flow and also review guidance. Rob will turn it back over to me, and I will review some of our market or strategic related comments, and then we will open it up fro Q&A.

So let me go ahead and start with the quarterly highlights. We are actually disappointed to report revenues of $53 million and pro forma earnings per share of $0.08 in the fourth quarter of fiscal 2013. The reason I say that, that after solid performance through the first three quarters of the year, very weak performance from our European and Australian operations, more than offset solid U.S. performance, which drove our fourth quarter results. The year-over-year difference in our European results on an earnings per share basis was $0.07 unfavorable in the fourth quarter, and although we have made several key leadership and sales related changes in both Europe and Australia, I wanted to make sure one knew that we will continue to make the necessary changes in our European operations in order to recapture our momentum and contribution from that region.

In the U.S., very different story; our results were as expected. Hackett U.S. continued to grow at a 10% rate, consistent with last quarter. We actually saw growth across all of our groups, and this was somewhat offset by solid performance from our SAP Group, what we classify under ERP Solutions, which actually had a solid quarter, but did show a slower growth. Internationally, which is really Europe and Australia, we were down more than expected with the weakness in Europe, coming primarily from the U.K., due to longer sales cycles and deferred project convergence.

On the balance sheet side, we actually generated terrific cash flow during the quarter, which we used to continue to -- use for our stock repurchases. We pay the annual dividend which falls in the fourth quarter, and we continue to pay down debt, some which we actually took down as part of the Dutch, which we also completed in the fourth quarter.

As a result of our buyback activity, during the quarter, the Board announced an additional $5 million expansion to our buyback program, so we can continue to be active and opportunistic in the market as available.

On the investment front, we continue to develop to attract talent and expand our branded intellectual property, by the best example of both innovation and IP development for us recently, has been the development of our new Hackett performance exchange. But we continue to also invest very heavily, and not only in the way we execute engagements for clients, but in the expansion and execution of our executive advisory offerings, which are also very important to us.

I will comment about these opportunities in more details in my strategic overview section of our call. I will also comment further on market conditions in 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?

Roberto Ramirez

Thank you, Ted. As I typically do, I will cover the following topics during our call, an overview of our fourth quarter results, along with an overview of related key operating specifics and overview of our cash flow activities during the quarter, and I will then conclude with a discussion on our financial outlook for the first 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 our references to gross revenue in my discussion represent net revenues plus reimbursable expenses.

As mentioned in previous quarters, we exited our Oracle ERP implementation practice during the first quarter of 2013, and as such historical permission discussed on this call has been recast for comparability purposes. Additionally, references to pro forma results, specifically exclude non-cash stock compensation expense, intangible asset amortization expense, results of discontinued operations, and one time acquisition related charges and assumes a normalized tax rate of 40%.

Before I move to our fourth quarter results, I'd like to make a few comments regarding our annual results for 2013. Annual revenues totaled $224 million, essentially flat in 2012. Pro forma earnings per diluted share were $0.41 in 2013, compared to $0.40 in the previous year, an increase of 3%. For both 2013 and 2012, pro form EBITDA was approximately $25 million.

As we discussed last quarter, our Hackett International operations, mostly Europe, were expected to be down significantly for the fourth quarter, which offset U.S. growth. International revenues in the fourth quarter were down 31% on a year-over-year basis. This negatively impacted pro forma earnings per share by approximately $0.07 in the fourth quarter of 2013, which was approximately one penny more than our guidance forecast.

During 2013, we were pleased that we were able to utilize our strong balance sheet and cash flow to return capital to our shareholders. First, we completed the stock tender offer, that resulted in the repurchase of approximately 1 million shares of the company stock, at a price of $7 per share, for a total of approximately $7 million, excluding fees and expenses. In addition during the fourth quarter, the company paid its annual dividend of $0.10 per share, for a total of $3.1 million.

Now moving on to more specifics on the fourth quarter; as I mentioned on our third quarter call and discussed in the fourth quarter guidance, the fourth quarter was negatively impacted by the typical seasonal increase in holidays and vacations utilized in both the U.S. and Europe, which unfavorably impacted available base by approximately 5% on a sequential basis.

Having said that, for the fourth quarter of 2013, total company gross revenues were $52.6 million, a 4% decline on a year-over-year basis. As we discussed during our previous call, this overall revenue decline was primarily due to the decline in international revenues, mostly related to Europe. Total company international gross revenues accounted for 18% of total company revenues in the fourth quarter, as compared to 24% in the fourth quarter of 2012. Gross revenues for the Hackett Group, which excludes ERP Solutions, were approximately $44.2 million in the fourth quarter of 2013, or down approximately 2% on a year-over-year basis, with Hackett U.S. revenues up 10%, but offset by the 31% decline in Hackett International revenues.

Hackett Group annualized gross revenue for professional was $332,000 in the fourth quarter of 2013, as compared to $342,000 in the fourth quarter of 2012, and $358,000 in the previous quarter. Gross revenues from our ERP Solutions Group, which consists of our SAP implementation practice, totaled $8.5 million, down 15% on a year-over-year basis and 8% sequentially, as expected. It is worth noting, as Ted mentioned, that this comparison comes off very strong 2012 results.

ERP Solutions hourly gross realized billing rate per hour was $127 in the fourth quarter of 2013, as compared to $135 in the fourth quarter of 2012. This includes the impact of our offshore resources, which is approximately 45% of our ERP implementation resources. ERP Solutions consultant utilization was 71% for the fourth quarter of 2013, as compared to 68% in the fourth quarter of the previous year.

Total company pro form cost of sales, excluding reimbursable expenses and stock compensation expense, totaled $30.3 million or 64.3% of net revenues, as compared to $30.7 million or 62.2% of net revenues in the previous year. Total company consultant headcount was 702 at the end of the fourth quarter of 2013 as compared to 718 in the previous quarter and 724 at the end of the fourth quarter of 2012. This year-over-year decrease was primarily attributable to headcount adjustments, commensurate with market finance and our ERP Solutions Group.

Total company pro form gross margin was 35.7% of net revenues in the fourth quarter of 2013, as compared to 37.8% in the fourth quarter of the previous year. Hackett Group pro forma gross margins on net revenue was 35% in the fourth quarter, as compared to 37% in the fourth quarter of the previous year, again, primarily due to the decline in Hackett International revenues.

ERP Solutions pro forma gross margins on net revenues were 38% in the fourth quarter of 2013, as compared to 41% in the previous year, primarily due to decreased SAP license revenues.

Pro forma SG&A was $12.7 million or 26.9% of net revenues in the fourth quarter, as compared to $12.9 million or 26.2% of net revenues in the previous year. This 70 basis point increase is primarily due to decreased revenues on a year-over-year basis. Interest expense on borrowings under our credit facility was $111,000, this compares to $160,000 of interest expense in the prior fiscal year. This decrease is a result of debt repayments throughout 2013, which decreased our average debt balance in 2013, when compared to 2012.

Total company pro forma net income for the fourth quarter of 2013 totaled $2.4 million or $0.08 per diluted share and was at the midpoint of our fourth quarter guidance. This performance compares to pro forma net income of $3.4 million or $0.11 per diluted share in the fourth quarter of 2012. Total company pro forma net income for the fourth quarter of 2013, excluding non-cash stock compensation expense of $1.4 million, intangible asset amortization expense of $151,000, one time acquisition related charges of $188,000 and assumes a normalized tax rate of 40% of $1.6 million.

Pro forma EBITDA on net revenue in the fourth quarter of 2013 was $4.6 million or 9.8% of net revenues, as compared to $6.2 million or 12.6% of net revenues in the fourth quarter of 2012. GAAP diluted earnings per share were $0.04 for the fourth quarter of 2013, as compared to $0.21 from the same period in 2012. GAAP net income for the fourth quarter of 2012, included a tax benefit of $4 million or $0.13 per diluted share, due to the release of deferred tax valuation allowances as we previously discussed. Excluding the $0.13 impact in the fourth quarter of 2012, a comparable number will be $0.08.

GAAP diluted earnings per share for the full year of 2013 was $0.27, as compared to fully diluted earnings per share of $0.50 in the previous fiscal year. Again, the GAAP net income for the full year of 2012 included a tax benefit of $6.7 million or $0.20 per diluted share, due to the same release of deferred tax valuation allowances that we discussed. Excluding the $0.20 impact on 2012, the comparable number would be $0.30.

At the end of the fourth quarter of 2013, the company had approximately $70 million and $20 million of income tax loss carry-forwards remaining in the U.S. and in foreign tax jurisdictions respectively. As a result, for tax purposes, we will continue to have the ability to offset most of the U.S. and international tax liabilities.

Now turning to cash, the company's cash balances were $18.6 million at the end of the fourth quarter of 2013, as compared to $15.4 million at the end of the previous quarter. This cash increase in Q4 was primarily attributable to net cash generated from operations and net borrowings at our credit facility, offset by repurchase of common stock and dividend that were announced and paid.

Net cash generated by operating activities in the fourth quarter was $15.2 million, which was primarily driven by operating earnings adjusted for non-cash items, decreases in accounts receivable, increases in accrued expenses, primarily relating to the timing of U.S. payroll items, and increases in deferred revenue, and an increase in accounts payable, due to the timing of vendor payments.

During the fourth quarter of 2013, the company borrowed a net $4 million for its credit facility to our most recent tender offer and most of our subsequent share repurchases made during the quarter. At the end of the fourth quarter, the company had $19 million of borrowings outstanding under its credit facility.

During the fourth quarter, we purchased approximately 1 million shares of the company's stock through our stock tender offer at a cost of approximately $7 million. Subsequent to the tender offer, the company repurchased another 894,000 shares for $5.4 million at an average cost of $6 per share. Our DSO or days sales outstanding, at the end of both the fourth quarter or 2013 and 2012 was 59 days.

I will now turn to our guidance for the first quarter; before I do that, I'd like to remind everyone of the seasonality of our business, relative to costs, as we move from Q4 to Q1. Specifically, consistent with first quarter guidance provided in previous years, our first quarter guidance for 2014 will reflect the sequential increase in U.S. payroll related taxes and the sequential buildup of [indiscernible] growth.

We expect total company gross revenues for the first quarter of 2013 to be in the range of $51 million to $53 million, with a reimbursable expense estimate of 12% on net revenues. This compares to a prior year gross revenue amount of $54 million, due to a reimbursable expense ratio of 11.2% on net revenues. We expect U.S. gross revenues for the first quarter to be up on a year-over-year basis by approximately 5% to 7%, with Hackett U.S. estimated to be up strongly and ERP solutions to be down. International revenues, mostly derived from Europe, are expected to be down on a year-over-year basis by approximately 30%.

Relative to pro forma diluted earnings per share, we expect that our first quarter will be negatively impacted by approximately $0.06 on a year-over-year basis, due to continued weakness of our European operations. As such, we expect our pro forma diluted earnings per share in the fourth quarter of 2014, to be in the range of $0.06 to $0.07 per diluted share. Our pro forma guidance excludes amortization expense, non-cash stock compensation expense, other one time acquisition related charges, and include a normalized tax rate of 40%.

As a result of our revenue guidance, we expect pro forma gross margin on net revenues to be approximately 35% to 36% in the first quarter. We expect pro form SG&A and interest expense for the first quarter to be approximately $30 million. We expect first quarter pro forma EBITDA on net revenues to be in the range of 7% to 9%.

We expect our cash balances, excluding the impact of debt repayment and any share buyback activity to be down on a sequential basis, due to the payment of 2013 performance related bonuses.

At this point, I'd like to turn it back over to Ted to review our market outlook and strategic priorities in the coming months.

Ted Fernandez

Thank you, Rob. As we look forward, we expect continued year-over-year growth from our U.S. business, across nearly all of our groups. In fact, as we get a little bit further into the year, our SAP Group will also start comping a little bit better, than they have here in the latter part of 2013.

We also expect demand internationally to remain adequate, but characterized by the uneven and prolonged decision making -- behavior that we have seen as compared to the U.S. As I mentioned last quarter, we believe that some of our international volatility may be a result of our limited solution offering when compared to the U.S. A key part of our solid U.S. activity is due to the very strong enterprise performance management and business intelligence capability that we have in the U.S., which represents over 40% of total U.S. Hackett revenues.

I also mentioned last quarter, that we had a new European leader coming on board, that individual has in fact joined us in early January, and probably one of the most important things about this individual, in addition to the fat that this is someone that we had known for a while, but had been unable to attract, is that he actually specializes in the EPM and BI area, which is an area that, as I mentioned last quarter, we want to build out throughout Europe. Our plan is to do that throughout 2014, and our effort will be to try to mirror the U.S. capabilities in Europe, and that will require us to build out our EPM and BI strength globally.

We think that will improve the ability to grow in Europe, we also think that it will further strengthen our global delivery capabilities for large EPM and BI jobs that originate in the U.S., which are important to our large multinational engagements.

Beyond our immediate focus in Europe, our strategy is to continue to build our brand building dedicated skill around 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, so IP-based services enhance our opportunity to serve clients remotely, continuously, and we also believe, more profitably.

Our goal is to use our unique intellectual capital to establish a strategic relationship with our client, to further use that entry point, than to introduce our business transformation and technology consulting capabilities. This strategy, would allow us to increase our client base, profitability and increase revenue per client. I always like to allude to the fact that the leverage IP that we've continued to nurture into our executive advisory program, has been a great example of where utilizing IP to drive continuous relationships as a result to gain expanding client revenue, and revenue for client, for those clients that use that executive advisory offering.

Specific to the executive advisory client phase, we have always said that 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 eventually, also through our Hackett performance exchange.

At the end of the year, our executive advisory program's totaled 852 across 265 clients, and consistent with prior quarters, over 40% of our Hackett Q4 sales were also advisory clients, which continues to show the strong relationship leverage to IP and IP-based offering.

On Hackett Performance Exchange front, we have completed our planned enhancements to both our Oracle and SAP offerings, doesn't mean we are done. We will continue to enhance these offerings, as we continue to get clients to come and utilize our platform and we continue to figure out how to enhance the offer. But we have started to build out our dedicated sales group which I mentioned last quarter, and we will continue to add to this team throughout the year. As I repeatedly mentioned, this is an ambitious new offering, but is successful to help us enhance our business model by creating a powerful and possibly continuous relationship of the client, and although we continue to learn how best to sell and leverage our HPE offerings, we now believe that this new platform will not only be utilized as an edge [ph] offering, but 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, analyze the [indiscernible] scope, scale or capability to accelerate our growth. I would also add that our efficient access to debt further encourages its focus.

In summary, we reported solid quarterly results, but its clear, that we must be more successful in Europe. We did not like having such strong U.S. success offset by the 30% decrease in European revenues, but we know that we must be successful in Europe, in order to continue to grow our total revenues and profit, so that will continue to have a significant part of our attention, at least in the near future.

As I mentioned in my opening comments though, we will continue to make the necessary changes and investments in the region to ensure our success. So I assure you, that we will not stand still and we will try to recapture that European contribution to our total revenue growth and profitability, as quickly as possible.

Having said that, we also continue to believe that our unique ability to combine proprietary intellectual capital with terrific talent to help our clients optimize their performance, specially in this complex demand environment, allows us to remain top of mind, with leading global companies, and bodes well for our prospects. I always liked to see how many inquiries we get to our Executive Advisory Program, because I know these are touch points with these global 2000 companies, and I am always -- I am pleased to see that we continue to average over 1,000 inquiries over our membership base throughout the quarter, which just tells me that, clients really value the feedback and we are continuously engaged with them in that process.

Lastly, let me close by thanking our associates for their tireless effort and [indiscernible] to stay highly focused on our clients, our people and the exciting opportunity available to our organization.

Those conclude my comments, let me then turn it back over to the narrator, to see if we can open it up for Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from Morris Ajzenman of Griffin Securities. Go ahead sir. Your line is open.

Morris Ajzenman - Griffin Securities

Hi guys.

Ted Fernandez

Hey Morris.

Morris Ajzenman - Griffin Securities

International, Europe and Australia, I guess we kind of got a heads-up on the previous quarter, as you exit the third quarter. Back then, you also talked about some deferral projects, and then during your [indiscernible], you talked about lack of product offerings, let's call it, relative to U.S. How much is actually clients just deferring or is that a small part of it, are they [indiscernible] or are they just not going forward with projects? Put more color if you can on, the nuances of what these difficulties are? I guess, specifically in the U.K.?

Ted Fernandez

Well I would say, our comments now would be consistent, Morris. We continue to work with a significant number of clients in Europe, on significant initiatives. But we have seen, specially as we got, as they started looking at -- it really started to tail into Q3 if you recall, impacted a little bit of Q3 and then we felt the full weight of it into Q4, and then, we are seeing improved activity in some areas, in the first quarter, but we also think that they were -- we just didn't come out of the box, the way we would have hoped they could have, just so we could get a quick rebound. But we are probably -- we have some optimism that we will see some of our activity pick up, as we head into Q2. But given the volatility, you know the way I am, I will tell you about it once I actually see it.

But that is our hope. Clients simply knowing that they have to do some things, but deferring, second guessing, and we saw a little bit of that happening in Q1, with things starting out a little bit later than we hoped in Europe, and probably more specifically in the U.K., probably more solid activity relative to Germany, but we also think Germany could be a much bigger business for us as well. But as I said in my opening comments, not only did we make the people change in order to expand the capability, we do know that we need to work the client, and those clients -- and execute with those clients, probably as well as ever, and will continue to make changes in each of those.

We really region into -- if you want to call regional groups, we will continue to make changes, until our execution improves; because I think market opportunity is more volatile than the U.S., but as you recall, we had Europe give us a quarter blip, if you said -- if you look back at 2010, 2011 and 2012, we had some quarter that disappointed us, but we saw the bounce come back a little quicker. I would say, the timing of this hitting in the fourth quarter, and then I was waiting to see projects initiate in Q1, not the way we hoped, mainly, that we need to be a little bit more aggressive in both the transition. The introduction of our EPM and BI offering in Europe, which we will be, and continue that talent make for the changes if we have to.

Morris Ajzenman - Griffin Securities

And just a follow-up on that, you say you work with a significant number of clients in Europe, and then you highlight U.K. being weak. Is this of course the broader weakness, or was it one or two customers particularly that really hindered the comparisons?

Ted Fernandez

No the end decision was more prevalent in the U.K. than in Germany, that's probably the best way to characterize it. I look at it one or two ways, we know clients are challenged by the volatile and complex environments. We see how these multinationals are using us with increasing, in a nice and meaningful way. Let's not just kind of push aside the 10% growth in U.S., Hackett core U.S. last two quarters, and in fact, we will do better than 10% in Q1. We just think that these are large companies that are based in Europe, and that the need for our services shouldn't differ that much though. We still believe that the opportunity in Europe is significant, and until we turnaround, I will just chalk it up for poor execution on our part, and also expanding the service offering, to more closely mirror U.S.

Morris Ajzenman - Griffin Securities

Ted, my question was specific to UK. Is this one or two customers, or is this a plethora of customers that --

Ted Fernandez

It's broader. Clients' willingness to move forward through phases, the velocity of those decisions, I would say it has been more difficult in the U.K. for us, than it has in Germany.

Morris Ajzenman - Griffin Securities

Okay. One last question, and I'll get back in queue here. When you talk about Hackett Performance Exchange, entering the first quarter 2014, are we on schedule or are we behind schedule? Where were you looking at this a year ago? Where are we right now, and where are we on actually paid subscriptions?

Ted Fernandez

Well, we are not going to provide those paid subscriptions, because we are building that base right now. Once you have enough, I will start commenting. But now I consider 2014, we realize 2013 -- it took all of 2013 to complete the plan changes we wanted to make to HPE. So as I mentioned last quarter, we started then going back and say, okay, let's start bringing on some sales, support etcetera, that are going to be dedicated to the offering, and we think 2014 for us, now that the product is working as intended, is really to make 2014 for us, a proof point, and that would be to have a nice number of clients across both platforms, SAP and Oracle platforms by the end of 2014.

But, other than our own internal targets, we are not providing any guidance or commenting on specific numbers until we see them materialize.

Morris Ajzenman - Griffin Securities

Thank you.

Operator

Our next question comes from George Sutton of Craig Hallum Capital. Go ahead sir, your line is open.

Jason Kreyer - Craig Hallum

Hey good afternoon guys. Its Jason on for George Sutton.

Ted Fernandez

Hi Jason.

Jason Kreyer - Craig Hallum

So, you talked about the European EPM update and you put some new leadership in place there, just wondering if you can may be walk through, what further changes you need to make and what kind of a timeframe we should expect for those changes, and when we should kind of see a turnaround in that business?

Ted Fernandez

I would break it up into two pieces. In fairness to the new leader, who actually will be leading the charge to build our EPM and BI capabilities, that's [indiscernible] came on board, January 10. We are excited to have him. We think he's going to be a terrific leader, and the fact that he has this capability, is going to be very helpful to us, given our capabilities in the U.S. So I would say, for us to start building on that capability and getting some EPM activity on board, will take at least a couple of quarters, and that's specific to EPM.

What was the second part of your question, Jason?

Jason Kreyer - Craig Hallum

I think you nailed both parts there.

Ted Fernandez

Okay. I just wasn't sure.

Jason Kreyer - Craig Hallum

No, that's fine. And so another question for me. You did talk last quarter about one deal in Europe and one deal in Australia that got pushed from Q4 into Q1; and just wondering if those opportunities have been locked up since that time and if you've seen any other deals that have had further push-outs?

Ted Fernandez

Well we clearly saw a number of clients not make decisions in the normal timeframe that we expect. The Australian one, actually we do expect it to start shortly. So we will expect to see some of that benefit towards the tail end of this quarter and going into next. But it did take an extra, put at least half quarter to start, then we would have hoped. The large U.K. opportunity, we are still working with the client, but we still haven't gotten them off the dime, so that it can have a material impact on our result. If we had, you would not see the 30% year-on-year decline that we are projecting in Europe for Q1. Are we still working with that client? Yes. Reviewing several projects, yes. But meaningfully, start any of those initiatives in a meaningful way, the answer is no.

Jason Kreyer - Craig Hallum

Okay. Thanks for the color. Then just the last one for me, the U.S. business seems to be moving along pretty well, and just wondering if you can talk about anything specific points of the business, that are really driving that growth?

Ted Fernandez

Its really across the board. Its across the board, and if you think about the fact that we are saying that the SAP performance, which has been solid, financially, but coming off slower growth after some really rapid growth in 2012, we saw growth across almost every one of the practices, last quarter and we expect the same this quarter; so when you look at that, right, look at our overall scale and net opportunity, we are saying look, we obviously looked at the right mix. We clearly are only strengthening our leadership position in being able to measure, and as we tell clients, strategically size the price for improvement with engaged PE [ph] is only helping to tell that message with more credence, specially as it relates to anyone says that they are competing with us in that, if you want to call it entry space, that entry level space for benchmarking.

But, the other keys that we talked about quite a bit over the last couple of years, are EPM and BI Group continue to see quite a bit of activity, and that continues to grow. It's just a shame, that that's all really not what we are talking about, given how weak Europe was last quarter and will be this quarter.

Jason Kreyer - Craig Hallum

Sure. Well hopefully, we start talking more about the U.S. and less about Europe soon.

Ted Fernandez

Believe me, we are all over it.

Jason Kreyer - Craig Hallum

Okay. Thanks Ted.

Ted Fernandez

Yeah.

Operator

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

Ted Fernandez

Well let me thank everyone for participating in our fourth quarter earnings call. We look forward to updating you again, once we report the first quarter. Thanks again for participating.

Operator

Thank you for your participation in today's conference call. You may now disconnect.

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