Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenues of $77.7 million and revenues before reimbursements of $75.9 million, which was above the high end of guidance.
- Adjusted earnings per share of $0.39, at the high end of guidance.
- Strong performance in Oracle and SAP segments, with Oracle revenues increasing by 9% year-over-year.
- Increased demand for enterprise performance management offerings, benefiting from Oracle's sales commitment.
- Significant enhancements to AI XPLR platform, with version 2 expected to improve conversion rates and expand opportunities.
Negative Points
- Global strategy and business transformation segment revenues down 3% year-over-year due to economic headwinds and extended decision-making.
- Low project conversions from AI XPLR meetings despite high initial interest.
- E-procurement offerings particularly impacted by extended client decision-making.
- Total company consultant headcount slightly decreased from the previous quarter and the same period last year.
- Adjusted SG&A expenses increased to $16.8 million, representing 22.1% of revenues before reimbursements, up from 21.5% in the prior year.
Q & A Highlights
Q: Ted, you mentioned that you've had hundreds of meetings relative to the XPLR offering and you have thus far had low project conversions but expect that to increase strongly. I wondered if you could put a little bit more detail around those comments.
A: Well, I think what we're seeing is that the education side of our clients, which appear to be probably driving half of the calls that we were executing over the first three months since launching AI XPLR, are really now changing. Clients are now engaging clients who have dedicated some capabilities to AI. May have made some commitments to some Gen AI development platform to develop their use cases. Try to identify areas of the business for which it wants to pursue. But the overwhelming majority is simply, I'll say, testing or trying to develop their capabilities in very narrow areas in order to prove both their capabilities and then also the value realization from this effort.
Q: One other question relative to implementations. Just thinking through -- you mentioned strength in the Oracle practice, and I believe that's because of a push in part from their sales force. And I just wanted to confirm that. And then relative to the IPO of OneStream and your success in growing that practice, can you just give us an update there? Did you benefit from the IPO and the focus there? And then lastly, you called out e-procurement, which is, I believe, predominantly Coupa. They pulled back on their sales resources. Is that what's driving that area that's a bit of a challenge?
A: Well, I'll simply say that excluding the performance of that group, our SBT practice was probably up 3% or better instead of down 3%, just to give you some perspective and respond to that question without providing individual numbers about that practice. So I agree with your observations. How do we benefit? Look, we benefit when both OneStream is successful and Oracle is successful. We believe they're the top two EPM or CPM providers in the marketplace. We have this very strong capability in the EPM, both in the transformation as well as the software implementation. That relationship emanates from the very strong relationship we have with the CFO community. So we really like the fact that Oracle's reemphasize that area and we're benefiting from it. And yeah, we also believe that the OneStream IPO only benefits and creates an opportunity for OneStream to continue to grow its business. And if they do so, we're going to be an active participant in that growth.
Q: Ted, wanted to dive a little deeper on AI XPLR 2.0. You mentioned that it will be available later this month. How much do you think the new features particularly simulation that the difference in helping close conversions (multiple speakers)
A: I believe it's twofold, Jeff, I believe that clients are listening to our capabilities and are considering that within the context of their plans and they're becoming more informed. And the more detail we provide and how -- I think how strong we are is that ability to identify and design, which includes driving all the way through functional requirements and data sources, we believe, extends our capability and provide more value and capability that we're offering our clients. So one, those two things are important. I think also, so we're -- that's also extending our capabilities, all the way through to a proof of concept and validation. And again, the more we extend our capabilities and directly respond to what the clients need help with. We believe, for example, some of the things that are in the pipeline now are clients that we made early presentations to. We didn't hear much from. We thought they were educational. They picked up the phone, called us back. When they called us back, we were demonstrating greater credibility. That greater credibility has given us a chance to present a larger scope, which they now accept.
Q: The point I was trying to get at was simulation seems like it's a huge value add for the client. I was just curious how long it might take to do a simulation for a client. What all does that entail in terms of the pulling data from their systems?
A: Well, first, the first thing is to get them to believe that we can. So we've just started doing our first demos and the reaction is how are you doing, it, and may be hard for you to believe, but XPLR and the capabilities inside of Hubble when we provide the -- when we provide XPLR with the right level of information that correlates to that client's industry and more specific client information that we may get publicly or as a result of setting up the call is allowing us to get in front of the client, apologize for the fact that we did this without any direct involvement from them or direct information in the areas we're going to cover. But we think it's incredibly compelling for us to be able to turn to any or most -- let me not say any because it varies so much. Most areas of the business and have a conversation about the use cases there are available and what we believe is the feasibility of the use cases. And as you know, we break down use cases as breakthrough, transformative, and incremental. So then we also correlate to the benefit.
Q: You mentioned strategic partnerships. Just curious if you could help us understand the overarching strategy there. Is that to penetrate more the middle market? You mentioned -- you're intending to extend reach beyond the global 1,000. Just curious if you can give us the strategic viewpoint of how you're --
A: Well, first, beyond the global 1,000, as you know, we also have had vendor strategies in our IPaaS program, so we've had an initial conversation where we're trying to determine whether we can take some of those relationships and support their AI either extended or offerings by sharing our capabilities with their channel. So the answer is yes. We've initiated those conversations, so we'll see where they go. So relative to extending capabilities because of the success of AI XPLR and the fact that all the work that we paid by giving these clients these one (inaudible) or in some cases more than one session and review of XPLR and discussion around Gen AI adoption and related issues. It has attracted some of the, I'll call it, some of the firms that are now trying to transition their skills or build with some new skills in the AI implementation areas. So and as we walk into clients, sometimes we get it introduced to some providers. So we're kind of developing a good understanding of the ecosystem, who's out there, and figuring out the best way to work with them.
Q: Ted, shifting gears here a bit. With your heavy focus on the AI consulting, is there less emphasis currently on the market intelligence programs.
A: No, we're just it's -- interesting. We just don't believe that you -- obviously, there are requirements to help clients with organizational and enterprise app issues and areas that they want to continue to address. But when you engage the client more strategically or broadly
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
