HCKT Hackett Group Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 3, 2023

 

 

The Hackett Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

FLORIDA		333-48123		65-0750100
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

1001 Brickell Bay Drive, Suite 3000 Miami, Florida		33131
(Address of principal executive offices)		(Zip Code)

(305) 375-8005

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	HCKT	NASDAQ Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR § 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR § 240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On August 8, 2023, The Hackett Group, Inc. (the “Company”) issued a press release setting forth its consolidated financial results for the second fiscal quarter ended June 30, 2023. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein.

The information contained in Item 2.02 of this current report on Form 8-K, as well as Exhibit 99.1, is being furnished to the Securities and Exchange Commission and shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

 

 

 

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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Revised Executive Compensation Decisions for 2023. At its meeting held on February 16, 2023, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) reviewed and approved the 2023 base salaries and cash and equity incentive plan targets for the Company’s named executive officers as well as the Company’s other senior leaders. Consistent with prior years, the Compensation Committee approved a program for the Company’s named executive officers that, in addition to base salaries, would pay annual cash and equity incentive awards in connection with the achievement of challenging 2023 adjusted diluted net earnings per share performance targets.

The importance of annual contract value (“ACV”) growth is a very important part of the 2023 performance year. The Company currently estimates that these investments to grow ACV will negatively impact its full year 2023 adjusted earnings per share based on year to date results by approximately 12 cents. This would reduce Messrs. Fernandez’ and Dungan’s compensation opportunity “at Goal” by approximately 50%. Accordingly, the Compensation Committee reviewed the executive compensation programs for Messrs. Fernandez and Dungan and determined to add a new performance target for 2023 that would allow for Messrs. Fernandez and Dungan to have an opportunity, if fully earned, to achieve 100% of the original compensation opportunity at “Goal”. The Committee achieved this by adding a component that would reward them for 2023 ACV growth based on an established performance target for 2023 to appropriately align their compensation opportunities with the Company’s current ACV growth objectives. The Compensation Committee made these changes to the executive compensation program at its meeting on August 3, 2023.

Under the revised executive compensation program, in addition to the executive compensation programs described in the Company’s 2023 Proxy Statement, Messrs. Fernandez and Dungan would have an opportunity to earn a performance-based equity grant in the form of restricted stock units that would vest over three year equal to the actual dilutive impact from the planned ACV investments. The award under this new ACV growth program would start to be earned if the Company achieves a minimum of 10% ACV growth in fiscal 2023 and would be fully earned if the Company meets or exceeds a 20% ACV growth rate.

The Compensation Committee believes these revisions to Messrs. Fernandez’ and Dungan’s compensation program provide better alignment with the current objectives for the Company and replace incentives constructively eliminated by the level of investment the Company is making in the sales growth of its executive advisory and market intelligence offerings.

 

 

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Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit Number		Description
99.1		Press Release of The Hackett Group, Inc., dated August 8, 2023
104		Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				THE HACKETT GROUP, INC.
Date: August 8, 2023				By:		/s/ Robert A. Ramirez
						Robert A. Ramirez
						Executive Vice President, Finance and Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 99.1

 

 

 

 

Contact:

Robert A. Ramirez, CFO, 305-375-8005 or rramirez@thehackettgroup.com

The Hackett Group Announces Second Quarter 2023 Results

MIAMI, FL (August 8, 2023) – The Hackett Group, Inc. (NASDAQ: HCKT), a leading benchmarking, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class® performance, today announced its financial results for the second quarter, which ended on June 30, 2023.

Financial Highlights

“We reported solid operating results with 8% sequential revenue growth while continuing to increase our investment in program development and sales resources in our recurring high margin executive advisory and market intelligence offerings,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “More importantly, the current momentum is expected to continue into the third quarter and bodes well for the balance of the year.”

 

 

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Business Outlook for the Third Quarter of 2023

Based on the Company’s current outlook:

Conference Call and Webcast Details

Use of Non-GAAP Financial Measures

The Company provides adjusted earnings results (which exclude the loss from discontinued operations, non-cash stock-based compensation expense, acquisition-related compensation expense, acquisition-related non-cash stock-based compensation expense, restructuring charges and reversals, amortization of intangible assets and includes a GAAP tax rate) as a complement to results provided in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP results are provided to enhance the users' overall understanding of the Company's current financial performance and its prospects for the future. The Company believes the non-GAAP results provide useful information to both management and investors and by excluding certain expenses that it believes are not indicative of its core operating results. The non-GAAP measures are included to provide investors and management with an alternative method for assessing operating results in a manner that is focused on the performance of its ongoing primary operations and to provide a consistent basis for comparison between quarters. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting. The presentation of this additional non-GAAP information should be considered in addition to, and not as a substitute for or superior to, any results prepared in accordance with GAAP. See the reconciliation of actual results titled “Reconciliation of GAAP to Non-GAAP Measures” in the accompanying tables.

 

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The Company believes that the presentation of non-GAAP financial information on a forward-looking basis, including the guidance contained in this release, provides important supplemental information to management and investors regarding its anticipated results of operations. The Company is unable to provide a reconciliation of GAAP measures to corresponding forward-looking non-GAAP measures without unreasonable effort due to the high variability and low visibility of most of the items that have been excluded from these non-GAAP measures. For example, non-cash stock-based compensation expense is impacted by the Company’s future hiring needs, the type and volume of equity awards necessary for such future hiring, and the price at which the Company’s stock will trade in those future periods. In addition, the provision or benefit for income taxes is impacted by non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions. The effects of these reconciling items may be significant, as the items that are being excluded are difficult to predict.

About The Hackett Group®

The Hackett Group, Inc. (NASDAQ: HCKT) is a leading benchmarking, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class® performance.

Drawing upon our unparalleled intellectual property from more than 25,000 benchmark studies and our Hackett-Certified® best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of the DAX 40 and 52% of the FTSE 100 – captured through our leading benchmarking platform Quantum Leap® and our Digital Transformation Platform, we accelerate digital transformations, including enterprise cloud implementations.

For more information on The Hackett Group, visit: https://www.thehackettgroup.com/; email info@thehackettgroup.com; or call (770) 225-3600.

# # #

The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap, Digital World Class and Hackett Value Matrix are the registered marks of The Hackett Group.

Cautionary Statement Regarding “Forward-Looking” Statements

This release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Statements including without limitation, words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” seeks,” “estimates,” or other similar phrases or variations of such words or similar expressions indicating, present or future anticipated or expected occurrences or outcomes are intended to identify such forward-looking statements. Forward-looking statements are not statements of historical fact and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Factors that may impact such forward-looking statements include without limitation, the ability of The Hackett Group to effectively market its digital transformation and other consulting services, competition from other consulting and technology companies that may have or develop in the future, similar offerings, the commercial viability of The Hackett Group and its services as well as other risk detailed in The Hackett Group’s reports filed with the United States Securities and Exchange Commission. The Hackett Group does not undertake any duty to update this release or any forward-looking statements contained herein.

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Page 4 of 8 - The Hackett Group, Inc. Announces Second Quarter Results

 

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

		Quarter Ended								Six Months Ended
		June 30,				July 1,				June 30,			July 1,
		2023				2022				2023			2022
Revenue:
Revenue before reimbursements		$	75,641			$	74,768			$	145,472		$	149,876
Reimbursements			1,461				1,160				2,859			1,716
Total revenue			77,102				75,928				148,331			151,592
Costs and expenses:
Cost of service:
Personnel costs before reimbursable expenses (includes $1,643 and $3,169 and $1,483 and $3,149 of non-cash stock based compensation expense in the three and six months ended June 30, 2023 and July 1, 2022, respectively)			45,426				44,701				88,569			92,034
Reimbursable expenses			1,461				1,160				2,859			1,716
Total cost of service			46,887				45,861				91,428			93,750
Selling, general and administrative costs (includes $1,129 and $2,050 and $1,235 and $2,168 of non-cash stock based compensation expense in the three and six months ended June 30, 2023 and July 1, 2022, respectively)			17,425				15,886				32,861			30,252
Total costs and operating expenses			64,312				61,747				124,289			124,002
Operating income			12,790				14,181				24,042			27,590
Other expense, net:
Interest expense, net			(921	)			(28	)			(1,780	)		(56	)
Income from operations before income taxes			11,869				14,153				22,262			27,534
Income tax expense			3,149				3,938				5,381			6,814
Net income		$	8,720			$	10,215			$	16,881		$	20,720
Basic net income per common share:
Income per common share from operations		$	0.32			$	0.32			$	0.62		$	0.66
Weighted average common shares outstanding			27,192				31,652				27,109			31,551
Diluted net income per common share:
Income per common share from operations		$	0.32			$	0.32			$	0.62		$	0.65
Weighted average common and common equivalent shares outstanding			27,548				32,221				27,408			32,032

 

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Page 5 of 8 - The Hackett Group, Inc. Announces Second Quarter Results

 

 

The Hackett Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

		June 30,				December 30,
		2023				2022
ASSETS
Current assets:
Cash		$	15,834			$	30,255
Accounts receivable and contract assets, net			57,797				48,376
Prepaid expenses and other current assets			3,203				2,535
Total current assets			76,834				81,166
Property and equipment, net			19,856				19,359
Other assets			285				268
Goodwill			84,148				83,502
Operating lease right-of-use assets			1,804				698
Total assets		$	182,927			$	184,993
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	5,475			$	8,741
Accrued expenses and other liabilities			22,342				30,953
Contract liabilities			14,452				13,278
Income tax payable			3,373				5,759
Operating lease liabilities			1,226				870
Total current liabilities			46,868				59,601
Long-term deferred tax liability, net			9,339				6,877
Long-term debt			52,676				59,653
Operating lease liabilities			1,151				584
Total liabilities			110,034				126,715
Shareholders' equity			72,893				58,278
Total liabilities and shareholders' equity		$	182,927			$	184,993

 

 

 

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Page 6 of 8 - The Hackett Group, Inc. Announces Second Quarter Results

 

 

The Hackett Group, Inc.

SEGMENT PROFIT

(in thousands)

(unaudited)

 

			Quarter Ended								Six Months Ended
			June 30,				July 1,				June 30,				July 1,
			2023				2022				2023				2022
	Global S&BT (1):
	Total revenue (4)		$	43,632			$	44,530			$	85,967			$	87,167
	Segment profit (5)			13,102				16,269				26,909				31,910
	Oracle Solutions (2):
	Total revenue (4)		$	20,775			$	19,971			$	37,943			$	41,483
	Segment profit (5)			5,886				4,301				8,935				8,834
	SAP Solutions (3):
	Total revenue (4)		$	12,695			$	11,427			$	24,421			$	22,942
	Segment profit (5)			2,990				2,977				5,624				5,391
	Total Company:
	Total revenue (4)		$	77,102			$	75,928			$	148,331			$	151,592
	Total segment profit		$	21,978			$	23,547			$	41,468			$	46,135
	Items not allocated to segment level (5):
	Corporate general and administrative expenses			5,610				5,935				10,571				11,569
	Non-cash stock based compensation expense			2,772				2,718				5,219				5,317
	Restructuring and asset impairment settlement			-				(125	)			-				(125	)
	Depreciation and amortization			806				838				1,636				1,784
	Interest expense, net			921				28				1,780				56
	Income from continuing operations before taxes		$	11,869			$	14,153			$	22,262			$	27,534

 

(1) Global S&BT includes the results of our strategic businesses consulting practices, including Strategy and Business Transformation Consulting, Benchmarking, Business Advisory Services, IP as-a-Service and OneStream.

(2) Oracle Solutions includes the results of our EPM/ERP and AMS practices.

(3) SAP Solutions includes the results of our SAP applications and related SAP service offerings.

(4) Total revenue includes reimbursable expenses, which are project travel-related expenses passed through to a client with no associated operating margin.

(5) Segment profits consist of the revenue generated by the segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Items not allocated to the segment level include corporate costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment. Items not allocated to the segment level include corporate general and administrative expenses, non-cash stock based compensation expense, depreciation and amortization expense, restructuring charges and reversals and interest expense and foreign currency gains and losses. Corporate general and administrative expenses primarily include costs related to business support functions including accounting and finance, human resources, legal, information technology and office administration. Corporate general and administrative expenses exclude one-time, non-recurring expenses and benefits.

 

 

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Page 7 of 8 - The Hackett Group, Inc. Announces Second Quarter Results

 

 

The Hackett Group, Inc.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands, except per share data)

(unaudited)

 

		Quarter Ended								Six Months Ended
		June 30,				July 1,				June 30,			July 1,
		2023				2022				2023			2022
GAAP NET INCOME		$	8,720			$	10,215			$	16,881		$	20,720
Adjustments (1):
Non-cash stock based compensation expense (2)			2,769				2,714				5,213			5,309
Acquisition-related non-cash stock based compensation expense (3)			3				4				6			8
Restructuring and asset impairment settlement			-				(125	)			-			(125	)
Amortization of intangible assets (4)			-				10				-			154
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)			11,492				12,818				22,100			26,066
Tax effect of adjustments above (5)			731				669				1,377			1,364
ADJUSTED NET INCOME (1)		$	10,761			$	12,149			$	20,723		$	24,702
GAAP diluted net income per common share		$	0.32			$	0.32			$	0.62		$	0.65
Adjusted diluted net income per common share (1)		$	0.39			$	0.38			$	0.76		$	0.77
Weighted average common and common equivalent shares outstanding			27,548				32,221				27,408			32,032

 

(1) The Company provides adjusted earnings results (which exclude the loss from discontinued operations, non-cash stock based compensation expense, acquisition-related compensation expense, acquisition-related non-cash stock based compensation expense, restructuring charges and reversals, amortization of intangible assets and include a GAAP tax rate) as a complement to results provided in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP results are provided to enhance the users' overall understanding of the Company's current financial performance and its prospects for the future. The Company believes the non-GAAP results provide useful information to both management and investors and by excluding certain expenses that it believes are not indicative of its core operating results. The non-GAAP measures are included to provide investors and management with an alternative method for assessing operating results in a manner that is focused on the performance of ongoing operations and to provide a more consistent basis for comparison between quarters. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. In addition, since the Company has historically reported non-GAAP results to the investment community, it believes the continued inclusion of non-GAAP results provides consistency in its financial reporting. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

(2) Non-cash stock based compensation expense is accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation. The Company excludes non-cash stock based compensation expense and the related tax effects for the purposes of adjusted net income and adjusted diluted earnings per share. The Company believes that non-GAAP measures of profitability, which exclude non-cash stock based compensation, are widely used by investors.

(3) The Company incurs cash and non-cash stock based compensation expense for acquisition related consideration that is recognized over time under GAAP. The Company believes excluding these amounts more consistently presents its ongoing results of operations because they are related to acquisitions and not due to normal operating activities. The acquisition-related non-cash stock based compensation expense is also accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation.

(4) The Company has incurred expense on amortization of intangible assets related to various acquisitions. The Company excludes the effect of the amortization of intangibles from our adjusted results in order to more consistently present its ongoing results of operations.

(5) The adjustment for the income tax expense is based on the accounting treatment and income tax rate for the jurisdiction of each item. For the quarter end periods the impact of non-cash stock based compensation expense was $0.7 million and $0.7 million in 2023 and 2022, respectively, and the impact of intangible amortization was $3 thousand in 2022 and the impact on the restructuring and asset impairment reversal was $32 thousand in 2022. For the six month periods the impact of non-cash stock compensation was $1.4 million and $1.4 million in 2023 and 2022, respectively; the impact of intangible amortization was $32 thousand in 2022 and the impact on the restructuring and asset impairment reversal was $32 thousand in 2022.

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Page 8 of 8 - The Hackett Group, Inc. Announces Second Quarter Results

 

 

The Hackett Group, Inc.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

		Quarter Ended
		June 30,				March 31,				July 1,
		2023				2023				2022
Revenue Concentration:
(% of total revenue)
Top customer			5	%			5	%			7	%
Top 5 customers			16	%			16	%			18	%
Top 10 customers			24	%			24	%			26	%
Key Metrics and Other Financial Data:
Total Company:
Consultant headcount			1,148				1,128				1,125
Total headcount			1,401				1,368				1,339
Days sales outstanding (DSO)			68				66				59
Cash (used in) provided by operating activities (in thousands)		$	7,714			$	(3,063	)		$	18,235
Depreciation (in thousands)		$	806			$	830			$	828
Amortization (in thousands)		$	-			$	-			$	10
Capital expenditures (in thousands)		$	1,062			$	1,063			$	1,274
Remaining Plan authorization:
Shares purchased (in thousands)			-				37				-
Cost of shares repurchased (in thousands)		$	—			$	711			$	—
Average price per share of shares purchased		$	—			$	18.98			$	—
Remaining Plan authorization (in thousands) (1)		$	13,938			$	13,961			$	10,609
Shares Purchased to Satisfy Employee Net Vesting Obligations:
Shares purchased (in thousands)			6				162				4
Cost of shares purchased (in thousands)		$	119			$	3,526			$	76
Average price per share of shares purchased		$	19.00			$	21.75			$	21

 

(1) The decrease in the Plan authorization in the second quarter of 2023 related to additional transaction fees for the tender offer which ocurred in December 2022.

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v3.23.2

Document and Entity Information	Aug. 03, 2023
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0001057379
Document Type	8-K
Document Period End Date	Aug. 03, 2023
Entity Registrant Name	Hackett Group, Inc.
Entity Incorporation, State or Country Code	FL
Entity File Number	333-48123
Entity Tax Identification Number	65-0750100
Entity Address, Address Line One	1001 Brickell Bay Drive
Entity Address, Address Line Two	Suite 3000
Entity Address, City or Town	Miami
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33131
City Area Code	305
Local Phone Number	375-8005
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, par value $.001 per share
Trading Symbol	HCKT
Security Exchange Name	NASDAQ

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