HCKT Hackett Group Inc

The Hackett Group, Inc. (NASDAQ: HCKT), a leading benchmarking, executive advisory and strategic consultancy firm that enables organizations to achieve Digital World Class® performance, today announced its financial results for the third quarter, which ended on September 29, 2023.

Financial Highlights

• Total revenue in the third quarter of 2023 was $75.9 million and revenue before reimbursements was $74.6 million, which was above the high end of our guidance. This compares to total revenue of $72.0 million and revenue before reimbursements of $71.0 million in the third quarter of the prior year.
• GAAP diluted earnings per share was $0.34 in the third quarter of 2023, as compared to $0.32 in the third quarter of 2022.
• Third quarter 2023 adjusted diluted earnings per share, a non-GAAP measure, was $0.41, which was at the high end of our guidance, as compared to $0.37 in the third quarter of 2022. Adjusted financial information is provided to enhance the understanding of the Company’s financial performance and is reconciled to the Company’s GAAP information in the accompanying tables.
• As of September 29, 2023, the Company’s cash balances were $9.9 million, with a $44.0 million outstanding balance on the Company’s credit facility. During the third quarter of 2023, the Company paid down $9.0 million of its debt balance. As of the end of the third quarter of 2023, the Company's remaining share repurchase program authorization was $13.9 million.
• Subsequent to the end of the third quarter, the Company’s Board of Directors declared its fourth quarter 2023 dividend of $0.11 per share for its shareholders of record on December 22, 2023, to be paid on January 5, 2024.

“We continued to report solid operating results meeting or exceeding previously provided guidance while continuing to increase our investment in program development and sales resources in our recurring high margin IP offerings,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “We recently launched our new Hackett Connect platform and AI Explorer offering which avails our clients to our new delivery systems and capabilities in emerging areas important to our growth.”

Business Outlook for the Fourth Quarter of 2023

Based on the Company’s current outlook:

• The Company estimates total revenue before reimbursements for the fourth quarter of 2023 will be in the range of $69.0 million to $70.4 million.
• The Company estimates adjusted diluted earnings per share for the fourth quarter of 2023 to be in the range of $0.36 and $0.38, assuming a GAAP effective tax rate of 28.6%.

Conference Call and Webcast Details

• On Tuesday, November 7, 2023, senior management will discuss third quarter results in a conference call at 5:00 P.M. ET. The number for the conference call is (800) 593-0486, [Passcode: Third Quarter]. For International callers, please dial (517) 308-9371. Please dial in at least 5-10 minutes prior to start time. If you are unable to participate on the conference call, a rebroadcast will be available beginning at 8:00 P.M. ET on Tuesday, November 7, 2023 and will run through 5:00 P.M. ET on Tuesday, November 21, 2023. To access the rebroadcast, please dial (800) 944-1822. For International callers, please dial (203) 369-3872.
• In addition, The Hackett Group® will also be webcasting this conference call live. To participate, simply visit https://www.thehackettgroup.com approximately 10 minutes prior to the start of the call and click on the conference call link provided. An online replay of the call will be available after 8:00 P.M. ET on Tuesday, November 7, 2023 and will run through 5:00 P.M. ET on Tuesday, November 21, 2023. To access the replay, visit www.thehackettgroup.com.

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.

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, executive 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.

   

The Hackett Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Quarter Ended

 

Nine Months Ended

September 29,

 

September 30,

 

September 29,

 

September 30,

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue: Revenue before reimbursements

$

74,634

 

$

70,995

 

$

220,106

 

$

220,871

 

Reimbursements

 

1,222

 

 

1,038

 

 

4,081

 

 

2,754

 

Total revenue

 

75,856

 

 

72,033

 

 

224,187

 

 

223,625

 

  Costs and expenses: Cost of service: Personnel costs before reimbursable expenses (includes $1,518 and $4,687 and $1,652 and $4,801 of non-cash stock based compensation expense in the three and nine months ended September 29, 2023 and September 30, 2022, respectively)

 

44,421

 

 

42,870

 

 

132,990

 

 

134,904

 

Reimbursable expenses

 

1,222

 

 

1,038

 

 

4,081

 

 

2,754

 

Total cost of service

 

45,643

 

 

43,908

 

 

137,071

 

 

137,658

 

  Selling, general and administrative costs (includes $1,193 and $3,243 and $859 and $3,027 of non-cash stock based compensation expense in the three and nine months ended September 29, 2023 and September 30, 2022, respectively)

 

16,470

 

 

14,616

 

 

49,331

 

 

44,993

 

Restructuring and asset impairment settlement

 

-

 

 

(526

)

 

-

 

 

(651

)

Total costs and operating expenses

 

62,113

 

 

57,998

 

 

186,402

 

 

182,000

 

  Operating income

 

13,743

 

 

14,035

 

 

37,785

 

 

41,625

 

  Other expense, net: Interest expense, net

 

(814

)

 

(14

)

 

(2,594

)

 

(70

)

  Income from operations before income taxes

 

12,929

 

 

14,021

 

 

35,191

 

 

41,555

 

Income tax expense

 

3,509

 

 

3,655

 

 

8,890

 

 

10,469

 

Net income

$

9,420

 

$

10,366

 

$

26,301

 

$

31,086

 

  Basic net income per common share: Income per common share from operations

$

0.35

 

$

0.33

 

$

0.97

 

$

0.98

 

Weighted average common shares outstanding

 

27,220

 

 

31,686

 

 

27,146

 

 

31,596

 

  Diluted net income per common share: Income per common share from operations

$

0.34

 

$

0.32

 

$

0.95

 

$

0.97

 

Weighted average common and common equivalent shares outstanding

 

27,818

 

 

32,309

 

 

27,545

 

 

32,124

 

 

The Hackett Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

September 29, December 30,

2023

2022

ASSETS Current assets: Cash

$

9,879

$

30,255

Accounts receivable and contract assets, net

 

62,207

 

48,376

Prepaid expenses and other current assets

 

3,174

 

2,535

Total current assets

 

75,260

 

81,166

Property and equipment, net

 

20,033

 

19,359

Other assets

 

282

 

268

Goodwill

 

83,663

 

83,502

Operating lease right-of-use assets

 

1,609

 

698

Total assets

$

180,847

$

184,993

  LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable

$

5,039

$

8,741

Accrued expenses and other liabilities

 

23,726

 

30,953

Contract liabilities

 

12,869

 

13,278

Income tax payable

 

4,009

 

5,759

Operating lease liabilities

 

1,328

 

870

Total current liabilities

 

46,971

 

59,601

Long-term deferred tax liability, net

 

8,583

 

6,877

Long-term debt

 

43,694

 

59,653

Operating lease liabilities

 

757

 

584

Total liabilities

 

100,005

 

126,715

  Shareholders' equity

 

80,842

 

58,278

Total liabilities and shareholders' equity

$

180,847

$

184,993

   

The Hackett Group, Inc.

SEGMENT PROFIT

(in thousands)

(unaudited)

 

Quarter Ended

 

Nine Months Ended

September 29,

 

September 30,

 

September 29,

 

September 30,

2023

 

 

2022

 

 

2023

 

 

2022

 

Global S&BT (1): Total revenue (4)

$

43,798

$

41,593

 

$

129,765

$

128,760

 

Segment profit (5)

 

13,951

 

14,030

 

 

40,860

 

45,939

 

Oracle Solutions (2): Total revenue (4)

$

20,831

$

17,682

 

$

58,774

$

59,165

 

Segment profit (5)

 

5,031

 

3,313

 

 

13,966

 

12,147

 

SAP Solutions (3): Total revenue (4)

$

11,227

$

12,758

 

$

35,648

$

35,700

 

Segment profit (5)

 

2,861

 

3,847

 

 

8,486

 

9,238

 

Total Company: Total revenue (4)

$

75,856

$

72,033

 

$

224,187

$

223,625

 

  Total segment profit

$

21,843

$

21,190

 

$

63,312

$

67,324

 

Items not allocated to segment level (5): Corporate general and administrative expenses

 

4,497

 

4,332

 

 

15,069

 

15,899

 

Non-cash stock based compensation expense

 

2,711

 

2,511

 

 

7,930

 

7,828

 

Restructuring and asset impairment settlement

 

-

 

(526

)

 

-

 

(651

)

Depreciation and amortization

 

892

 

838

 

 

2,528

 

2,623

 

Interest expense, net

 

814

 

14

 

 

2,594

 

70

 

Income from continuing operations before taxes

$

12,929

$

14,021

 

$

35,191

$

41,555

 

  (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 charge and asset impairment, 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.  

The Hackett Group, Inc.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(in thousands, except per share data)

(unaudited)

 

Quarter Ended

 

Nine Months Ended

September 29,

 

September 30,

 

September 29,

 

September 30,

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

GAAP NET INCOME

$

9,420

$

10,366

 

$

26,301

$

31,086

 

Adjustments (1): Non-cash stock based compensation expense (2)

 

2,707

 

2,507

 

 

7,920

 

7,816

 

Acquisition-related non-cash stock based compensation expense (3)

 

4

 

4

 

 

10

 

12

 

Restructuring and asset impairment settlement

 

-

 

(526

)

 

-

 

(651

)

Amortization of intangible assets (4)

 

-

 

-

 

 

-

 

154

 

ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)

 

12,131

 

12,351

 

 

34,231

 

38,417

 

Tax effect of adjustments above (5)

 

716

 

511

 

 

2,093

 

1,875

 

ADJUSTED NET INCOME (1)

$

11,415

$

11,840

 

$

32,138

$

36,542

 

  GAAP diluted net income per common share

$

0.34

$

0.32

 

$

0.95

$

0.97

 

Adjusted diluted net income per common share (1)

$

0.41

$

0.37

 

$

1.17

$

1.14

 

Weighted average common and common equivalent shares outstanding

 

27,818

 

32,309

 

 

27,545

 

32,124

 

  (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 charge and asset impairment, 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 expense, 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 $0.6 million in 2023 and 2022, respectively, and the impact on the restructuring and asset impairment reversal was $0.1 million benefit in 2022. For the nine month periods the impact of non-cash stock compensation was $2.1 million and $2.0 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 $0.2 million benefit in 2022.

The Hackett Group, Inc.

SUPPLEMENTAL FINANCIAL DATA

(unaudited)

 

Quarter Ended

September 29,

 

June 30,

 

September 30,

 

2023

 

 

 

2023

 

 

 

2022

 

Segment Total Revenue and Revenue Before Reimbursements (in thousands): Global S&BT: Total revenue

$

43,798

 

$

43,632

 

$

41,593

 

Reimbursements

 

498

 

 

675

 

 

484

 

Revenue before reimbursements

$

43,300

 

$

42,957

 

$

41,109

 

  Oracle Solutions: Total revenue

$

20,831

 

$

20,775

 

$

17,682

 

Reimbursements

 

457

 

 

463

 

 

253

 

Revenue before reimbursements

$

20,374

 

$

20,312

 

$

17,429

 

  SAP Solutions: Total revenue

$

11,227

 

$

12,695

 

$

12,758

 

Reimbursements

 

267

 

 

323

 

 

301

 

Revenue before reimbursements

$

10,960

 

$

12,372

 

$

12,457

 

  Total segment revenue: Total revenue

$

75,856

 

$

77,102

 

$

72,033

 

Reimbursements

 

1,222

 

 

1,461

 

 

1,038

 

Revenue before reimbursements

$

74,634

 

$

75,641

 

$

70,995

 

    Revenue Concentration: (% of total revenue) Top customer

 

6

%

 

5

%

 

7

%

Top 5 customers

 

16

%

 

16

%

 

18

%

Top 10 customers

 

24

%

 

24

%

 

26

%

  Key Metrics and Other Financial Data:   Total Company: Consultant headcount

 

1,177

 

 

1,148

 

 

1,133

 

Total headcount

 

1,430

 

 

1,401

 

 

1,354

 

Days sales outstanding (DSO)

 

75

 

 

68

 

 

66

 

Cash provided by operating activities (in thousands)

$

7,167

 

$

7,714

 

$

9,789

 

Depreciation (in thousands)

$

892

 

$

806

 

$

838

 

Capital expenditures (in thousands)

$

1,078

 

$

1,062

 

$

893

 

  Remaining Plan authorization: Shares purchased (in thousands)

 

-

 

 

-

 

 

-

 

Cost of shares repurchased (in thousands)

$

—

 

$

—

 

$

—

 

Average price per share of shares purchased

$

—

 

$

—

 

$

—

 

Remaining Plan authorization (in thousands)

$

13,938

 

$

13,938

 

$

10,609

 

  Shares Purchased to Satisfy Employee Net Vesting Obligations: Shares purchased (in thousands)

 

3

 

 

6

 

 

3

 

Cost of shares purchased (in thousands)

$

66

 

$

119

 

$

69

 

Average price per share of shares purchased

$

23.55

 

$

19.00

 

$

21.05

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231107877295/en/

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