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 fourth quarter, which ended
on December 29, 2023.
Financial Highlights
- Total revenue in the fourth quarter of 2023 was $72.4 million
and revenue before reimbursements was $71.2 million, which exceeded
the high end of our guidance. This compares to total revenue of
$70.1 million and revenue before reimbursements of $68.8 million in
the fourth quarter of the prior year.
- GAAP diluted earnings per share was $0.28 in the fourth quarter
of 2023, as compared to $0.31 in the fourth quarter of 2022. GAAP
net income includes a one-time legal settlement and related costs
of $1.2M, or $0.03 per diluted earnings per share.
- Adjusted diluted earnings per share, a non-GAAP measure, was
$0.39, exceeding the high end of our guidance, as compared to $0.36
in the fourth 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.
- Cash flow from operations was $25.6 million for the fourth
quarter of 2023, as compared to $24.8 million in the fourth quarter
of 2022.
- As of December 29, 2023, the Company's cash balances were $21.0
million, with $33.0 million outstanding on the Company's credit
facility. During the fourth quarter of 2023, the Company paid down
$11.0 million of its debt balance.
- Subsequent to the end of the fourth quarter, the Company's
Board of Directors declared its first quarter 2024 dividend of
$0.11 per share for its shareholders of record on March 22, 2024,
to be paid on April 5, 2024.
"We reported solid operating results which exceeded our
previously provided guidance while continuing our investment in
program development and sales resources in our recurring high
margin IP and AI offerings," stated Ted A. Fernandez, Chairman
& CEO of The Hackett Group, Inc. "More importantly, our
recently launched generative artificial intelligence platform, AI
XPLR, is receiving favorable feedback. It has led to a significant
number of client meetings, enabling us to showcase our unique
ability to assess organizational opportunities by leveraging our
rapidly growing Use Case Repository to establish Gen AI roadmaps
with related benefit case analyses IP."
Business Outlook for the First Quarter of 2024
Based on the Company’s current outlook:
- The Company estimates total revenue before reimbursements for
the first quarter of 2024 will be in the range of $72.5 million to
$74.0 million.
- The Company estimates adjusted diluted earnings per share for
the first quarter of 2024 to be in the range of $0.36 and $0.39,
assuming a GAAP effective tax rate of 22%.
Conference Call and Webcast Details
- On Tuesday, February 20, 2024, senior management will discuss
fourth quarter results in a conference call at 5:00 P.M. ET. The
number for the conference call is (800) 593-0486 [Passcode: Fourth
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, February
20, 2024 and will run through 5:00 P.M. ET on Tuesday, March 5,
2024. To access the rebroadcast, please dial (888) 566-0474. For
International callers, please dial (203) 369-3610.
- 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, February 20, 2024 and will run through 5:00
P.M. ET on Tuesday, March 5, 2024. To access the replay, visit
www.thehackettgroup.com.
Use of Non-GAAP Financial Measures
The Company provides adjusted earnings results (which
historically has excluded 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
(settlement), legal settlement and related costs, 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, research advisory and strategic consultancy firm that
enables organizations to achieve Digital World Class®
performance.
Drawing upon our unparalleled intellectual property from more
than 26,000 benchmark studies and our Hackett-Certified® best
practices repository from the world’s leading businesses –
including 97% of the Dow Jones Industrials, 89% of the Fortune 100,
70% of the DAX 40 and 55% 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, artificial intelligence 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
Twelve Months Ended
December 29,
December 30,
December 29,
December 30,
2023
2022
2023
2022
Revenue: Revenue before reimbursements
$
71,167
$
68,817
$
291,273
$
289,688
Reimbursements
1,236
1,300
5,317
4,054
Total revenue
72,403
70,117
296,590
293,742
Costs and expenses: Cost of service: Personnel costs before
reimbursable expenses (includes $1,551 and $6,238 and $1,401 and
$6,201 of non-cash stock based compensation expense in the three
and twelve months ended December 29, 2023 and December 30, 2022,
respectively)
41,901
39,208
174,891
174,112
Reimbursable expenses
1,236
1,300
5,317
4,054
Total cost of service
43,137
40,508
180,208
178,166
Selling, general and administrative costs (includes $1,243
and $4,486 and $1,038 and $4,066 of non-cash stock based
compensation expense in the three and twelve months ended December
29, 2023 and December 30, 2022, respectively)
16,611
15,986
65,942
60,979
Restructuring and asset impairment settlement
-
-
-
(651
)
Legal settlement and related costs
1,178
-
1,178
-
Total costs and operating expenses
60,926
56,494
247,328
238,494
Operating income
11,477
13,623
49,262
55,248
Other expense, net: Interest expense, net
(641
)
(74
)
(3,235
)
(144
)
Income from operations before income taxes
10,836
13,549
46,027
55,104
Income tax expense
2,986
3,833
11,876
14,302
Net income
$
7,850
$
9,716
$
34,151
$
40,802
Basic net income per common share: Income per common share
from operations
$
0.29
$
0.32
$
1.26
$
1.30
Weighted average common shares outstanding
27,242
30,812
27,170
31,400
Diluted net income per common share: Income per common share
from operations
$
0.28
$
0.31
$
1.24
$
1.28
Weighted average common and common equivalent shares outstanding
27,912
31,474
27,637
31,962
The Hackett Group, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited)
December 29,
December 30,
2023
2022
ASSETS Current assets: Cash
$
20,957
$
30,255
Accounts receivable and contract assets, net
52,113
48,376
Prepaid expenses and other current assets
2,368
2,535
Total current assets
75,438
81,166
Property and equipment, net
20,044
19,359
Other assets
285
268
Goodwill
84,242
83,502
Operating lease right-of-use assets
1,419
698
Total assets
$
181,428
$
184,993
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable
$
7,557
$
8,741
Accrued expenses and other liabilities
26,801
30,953
Contract liabilities
12,087
13,278
Income tax payable
2,360
5,759
Operating lease liabilities
1,083
870
Total current liabilities
49,888
59,601
Long-term deferred tax liability, net
8,118
6,877
Long-term debt
32,711
59,653
Operating lease liabilities
631
584
Total liabilities
91,348
126,715
Shareholders' equity
90,080
58,278
Total liabilities and shareholders' equity
$
181,428
$
184,993
The Hackett Group, Inc. SEGMENT PROFIT
(in thousands) (unaudited)
Quarter Ended
Twelve Months Ended
December 29,
December 30,
December 29,
December 30,
2023
2022
2023
2022
Global S&BT (1): Total revenue (4)
$
42,162
$
40,901
$
171,927
$
169,660
Segment profit (5)
13,506
15,380
54,366
61,319
Oracle Solutions (2): Total revenue (4)
$
18,998
$
17,155
$
77,772
$
76,320
Segment profit (5)
4,094
3,188
18,060
15,335
SAP Solutions (3): Total revenue (4)
$
11,243
$
12,061
$
46,891
$
47,762
Segment profit (5)
3,439
3,589
11,925
12,827
Total Company: Total revenue (4)
$
72,403
$
70,117
$
296,590
$
293,742
Total segment profit
$
21,039
$
22,157
$
84,351
$
89,481
Items not allocated to segment level (5): Corporate general and
administrative expenses
4,696
5,281
19,766
21,180
Non-cash stock based compensation expense
2,794
2,439
10,724
10,267
Restructuring and asset impairment settlement
-
-
-
(651
)
Legal settlement and related costs
1,178
-
1,178
-
Depreciation and amortization
894
814
3,421
3,437
Interest expense, net
641
74
3,235
144
Income from continuing operations before taxes
$
10,836
$
13,549
$
46,027
$
55,104
(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 and asset
impairment charge (settlement), legal settlement and related costs,
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.
The Hackett Group, Inc. RECONCILIATION OF
GAAP TO NON-GAAP MEASURES (in thousands, except per share
data) (unaudited)
Quarter Ended
Twelve Months Ended
December 29,
December 30,
December 29,
December 30,
2023
2022
2023
2022
GAAP NET INCOME
$
7,850
$
9,716
$
34,151
$
40,802
Adjustments (1): Non-cash stock based compensation expense (2)
2,794
2,436
10,714
10,252
Acquisition-related non-cash stock based compensation expense (3)
-
3
10
15
Restructuring and asset impairment settlement
-
-
-
(651
)
Legal settlement and related costs
1,178
-
1,178
-
Amortization of intangible assets (4)
-
-
-
154
ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)
11,822
12,155
46,053
50,572
Tax effect of adjustments above (5)
996
687
3,089
2,562
ADJUSTED NET INCOME (1)
$
10,826
$
11,468
$
42,964
$
48,010
GAAP diluted net income per common share
$
0.28
$
0.31
$
1.24
$
1.28
Adjusted diluted net income per common share (1)
$
0.39
$
0.36
$
1.55
$
1.50
Weighted average common and common equivalent shares outstanding
27,912
31,474
27,637
31,962
(1) The Company provides adjusted earnings results (which
historically has excluded 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
(settlement), legal settlement and related costs, 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. (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 in 2023 and 2022, and the impact of the legal settlement
and related costs were $0.3 million in 2023. For the twelve month
periods the impact of non-cash stock compensation was $2.8 million
and $2.7 million in 2023 and 2022, respectively; the impact of
intangible amortization was $32 thousand in 2022; the impact on the
restructuring and asset impairment reversal was $0.2 million
benefit in 2022 and the impact of the legal settlement and related
costs were $0.3 million in 2023.
The Hackett
Group, Inc. SUPPLEMENTAL FINANCIAL DATA
(unaudited)
Quarter Ended
December 29,
September 29,
December 30,
2023
2023
2022
Segment Total Revenue and Revenue Before Reimbursements (in
thousands): Global S&BT: Total revenue
$
42,162
$
43,798
$
40,901
Reimbursements
566
498
482
Revenue before reimbursements
$
41,596
$
43,300
$
40,419
Oracle Solutions: Total revenue
$
18,998
$
20,831
$
17,155
Reimbursements
556
457
483
Revenue before reimbursements
$
18,442
$
20,374
$
16,672
SAP Solutions: Total revenue
$
11,243
$
11,227
$
12,061
Reimbursements
114
267
335
Revenue before reimbursements
$
11,129
$
10,960
$
11,726
Total segment revenue: Total revenue
$
72,403
$
75,856
$
70,117
Reimbursements
1,236
1,222
1,300
Revenue before reimbursements
$
71,167
$
74,634
$
68,817
Revenue Concentration: (% of total revenue) Top
customer
7
%
6
%
5
%
Top 5 customers
18
%
16
%
16
%
Top 10 customers
27
%
24
%
26
%
Key Metrics and Other Financial Data: Total
Company: Consultant headcount
1,168
1,177
1,128
Total headcount
1,416
1,430
1,353
Days sales outstanding (DSO)
65
75
63
Cash provided by operating activities (in thousands)
$
25,587
$
7,167
$
24,827
Depreciation (in thousands)
$
894
$
892
$
814
Capital expenditures (in thousands)
$
898
$
1,078
$
1,494
Remaining Plan authorization: Shares purchased (in
thousands)
-
-
4,889
Cost of shares repurchased (in thousands)
$
—
$
—
$
115,937
Average price per share of shares purchased
$
—
$
—
$
23.71
Remaining Plan authorization (in thousands)
$
13,938
$
13,938
$
14,672
Shares Purchased to Satisfy Employee Net Vesting
Obligations: Shares purchased (in thousands)
3
3
31
Cost of shares purchased (in thousands)
$
71
$
66
$
646
Average price per share of shares purchased
$
23.08
$
23.55
$
20.93
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240220802424/en/
Robert A. Ramirez, CFO, 305-375-8005 or
rramirez@thehackettgroup.com
Hackett (NASDAQ:HCKT)
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