HCKT Hackett Group Inc

The Hackett Group, Inc. (NASDAQ: HCKT), a leading Gen AI strategic consultancy and executive advisory firm that enables organizations to achieve Digital World Class® performance, today announced its financial results for the second quarter, which ended on June 28, 2024.

Financial Highlights

• Total revenue in the second quarter of 2024 was $77.7 million and revenue before reimbursements was $75.9 million, which exceeded the high end of our guidance. This compares to total revenue of $77.1 million and revenue before reimbursements of $75.6 million in the second quarter of the prior year.
• GAAP diluted earnings per share was $0.31 in the second quarter of 2024, as compared to $0.32 in the second quarter of 2023.
• Adjusted diluted earnings per share, a non-GAAP measure, was $0.39, which was at the high end of our guidance in the second quarter of 2024. Adjusted diluted earnings per share was $0.39 in the second quarter of 2023. 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 provided from operations was $13.7 million for the second quarter of 2024, as compared to $7.7 million in the second quarter of 2023.
• As of June 28, 2024, the Company's cash balances were $19.1 million, with $27.0 million outstanding on the Company's credit facility. The Company’s remaining share repurchase program authorization was $12.9 million.
• Subsequent to the end of the second quarter, the Company's Board of Directors declared its third quarter of 2024 dividend of $0.11 per share for its shareholders of record on September 20, 2024, to be paid on October 4, 2024.

“We continued to report solid operating results that met or exceeded our quarterly guidance. This was achieved while aggressively pivoting our capabilities and go-to-market efforts to address the emerging demand for Gen AI consulting, leveraging our new ideation and design platform, AI XPLR,” stated Ted A. Fernandez, Chairman & CEO of The Hackett Group, Inc. “Our focus during the quarter was to use the initial feedback from client meetings and new projects to enhance and extend the capabilities of AI XPLR. Our Version 2 of XPLR, which we plan to release this month, will include use case simulations and design functionality, which are significant upgrades from our Version 1 platform.”

Business Outlook for the Third Quarter of 2024

Based on the Company’s current outlook:

• The Company estimates total revenue before reimbursements for the third quarter of 2024 will be in the range of $74.5 million to $76.0 million.
• The Company estimates adjusted diluted earnings per share for the third quarter of 2024 to be in the range of $0.39 and $0.41, which assumes a GAAP effective tax rate of 27.7%.

Conference Call and Webcast Details

• On Tuesday, August 6, 2024, senior management will discuss second quarter results in a conference call at 5:00 P.M. ET. The number for the conference call is (800) 593-0486, [Passcode: Second 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, August 6, 2024 and will run through 5:00 P.M. ET on Tuesday, August 20, 2024. To access the rebroadcast, please dial (888) 566-0039. For International callers, please dial (203) 369-3039.
• 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, August 6, 2024 and will run through 5:00 P.M. ET on Tuesday, August 20, 2024. To access the replay, visit www.thehackettgroup.com.

Use of Non-GAAP Financial Measures

The Company provides adjusted earnings results (which excluded non-cash stock-based compensation expense, acquisition-related non-cash stock-based compensation expense, legal settlement and related costs 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 Gen AI strategic consultancy and executive advisory firm that enables organizations to achieve Digital World Class® performance. Using AI XPLR™ – our Gen AI assessment platform – helps organizations achieve quantifiable, breakthrough results, allowing us to be key architects of their Gen AI journey.

Our expertise is grounded in unparalleled best practices insights from benchmarking 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 – and are delivered leveraging our Digital Transformation Platform, Hackett Connect™ and Quantum Leap®.

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

The Hackett Group, quadrant logo, World Class Defined and Enabled, Quantum Leap, and Digital World Class 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 artificial intelligence, 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

 

Six Months Ended

June 28,

 

June 30,

 

June 28,

 

June 30,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue: Revenue before reimbursements

$

75,896

 

$

75,641

 

$

151,623

 

$

145,472

 

Reimbursements

 

1,760

 

 

1,461

 

 

3,220

 

 

2,859

 

Total revenue

 

77,656

 

 

77,102

 

 

154,843

 

 

148,331

 

  Costs and expenses: Cost of service: Personnel costs before reimbursable expenses (includes $1,640 and $3,033 and $1,643 and $3,169 of non-cash stock based compensation expense in the three and six months ended June 28, 2024 and June 30, 2023, respectively)

 

45,395

 

 

45,426

 

 

91,166

 

 

88,569

 

Reimbursable expenses

 

1,760

 

 

1,461

 

 

3,220

 

 

2,859

 

Total cost of service

 

47,155

 

 

46,887

 

 

94,386

 

 

91,428

 

  Selling, general and administrative costs (includes $1,210 and $2,416 and $1,129 and $2,050 of non-cash stock based compensation expense in the three and six months ended June 28, 2024 and June 30, 2023, respectively)

 

17,985

 

 

17,425

 

 

36,314

 

 

32,861

 

Legal settlement and related costs

 

—

 

 

—

 

 

102

 

 

—

 

Total costs and operating expenses

 

65,140

 

 

64,312

 

 

130,802

 

 

124,289

 

  Operating income

 

12,516

 

 

12,790

 

 

24,041

 

 

24,042

 

  Other expense, net: Interest expense, net

 

(512

)

 

(921

)

 

(984

)

 

(1,780

)

  Income before income taxes

 

12,004

 

 

11,869

 

 

23,057

 

 

22,262

 

Income tax expense

 

3,256

 

 

3,149

 

 

5,578

 

 

5,381

 

Net income

$

8,748

 

$

8,720

 

$

17,479

 

$

16,881

 

  Basic net income per common share: Income per common share

$

0.32

 

$

0.32

 

$

0.64

 

$

0.62

 

Weighted average common shares outstanding

 

27,616

 

 

27,192

 

 

27,519

 

 

27,109

 

  Diluted net income per common share: Income per common share

$

0.31

 

$

0.32

 

$

0.63

 

$

0.62

 

Weighted average common and common equivalent shares outstanding

 

27,943

 

 

27,548

 

 

27,809

 

 

27,408

 

        The Hackett Group, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)

June 28,

 

December 29,

2024

 

2023

ASSETS

Current assets: Cash

$

19,145

$

20,957

Accounts receivable and contract assets, net

 

58,133

 

52,113

Prepaid expenses and other current assets

 

2,981

 

2,368

Total current assets

 

80,259

 

75,438

Property and equipment, net

 

19,990

 

20,044

Other assets

 

375

 

285

Goodwill

 

84,110

 

84,242

Operating lease right-of-use assets

 

2,790

 

1,419

Total assets

$

187,524

$

181,428

 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable

$

4,290

$

7,557

Accrued expenses and other liabilities

 

24,048

 

26,801

Contract liabilities

 

13,299

 

12,087

Income tax payable

 

4,242

 

2,360

Operating lease liabilities

 

927

 

1,083

Total current liabilities

 

46,806

 

49,888

Long-term deferred tax liability, net

 

9,626

 

8,118

Long-term debt

 

26,747

 

32,711

Operating lease liabilities

 

2,122

 

631

Total liabilities

 

85,301

 

91,348

  Shareholders' equity

 

102,223

 

90,080

Total liabilities and shareholders' equity

$

187,524

$

181,428

        The Hackett Group, Inc. SEGMENT PROFIT (in thousands) (unaudited)  

Quarter Ended

 

Six Months Ended

June 28,

 

June 30,

 

June 28,

 

June 30,

2024

 

2023

 

2024

 

2023

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

$

42,262

$

43,632

$

83,154

$

85,967

Segment profit (5)

 

12,748

 

13,102

 

22,802

 

26,909

Oracle Solutions (2): Total revenue (4)

$

23,045

$

20,775

$

44,774

$

37,943

Segment profit (5)

 

5,369

 

5,886

 

10,630

 

8,935

SAP Solutions (3): Total revenue (4)

$

12,349

$

12,695

$

26,915

$

24,421

Segment profit (5)

 

3,253

 

2,990

 

8,135

 

5,624

Total Company: Total revenue (4)

$

77,656

$

77,102

$

154,843

$

148,331

  Total segment profit

$

21,370

$

21,978

$

41,567

$

41,468

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

 

5,063

 

5,610

 

10,092

 

10,571

Non-cash stock based compensation expense

 

2,850

 

2,772

 

5,449

 

5,219

Legal settlement and related costs

 

-

 

-

 

102

 

-

Depreciation expense

 

941

 

806

 

1,883

 

1,636

Interest expense, net

 

512

 

921

 

984

 

1,780

Income before taxes

$

12,004

$

11,869

$

23,057

$

22,262

  (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 expense, legal settlement and related costs, 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

 

Six Months Ended

June 28,

 

June 30,

 

June 28,

 

June 30,

2024

 

2023

 

2024

 

2023

GAAP NET INCOME

$

8,748

$

8,720

$

17,479

$

16,881

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

 

2,850

 

2,769

 

5,449

 

5,213

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

 

-

 

3

 

-

 

6

Legal settlement and related costs

 

-

 

-

 

102

 

-

ADJUSTED NET INCOME BEFORE INCOME TAXES ON ADJUSTMENTS (1)

 

11,598

 

11,492

 

23,030

 

22,100

Tax effect of adjustments above (4)

 

748

 

731

 

1,455

 

1,377

ADJUSTED NET INCOME (1)

$

10,850

$

10,761

$

21,575

$

20,723

  GAAP diluted net income per common share

$

0.31

$

0.32

$

0.63

$

0.62

Adjusted diluted net income per common share (1)

$

0.39

$

0.39

$

0.78

$

0.76

Weighted average common and common equivalent shares outstanding

 

27,943

 

27,548

 

27,809

 

27,408

(1) The Company provides adjusted earnings results (which excludes non-cash stock-based compensation expense, acquisition-related non-cash stock-based compensation expense, legal settlement and related costs 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 adjustment for the income tax expense is based on the accounting treatment and income tax rate for the jurisdiction of each item. The impact of non-cash stock based compensation expense was $0.7 million in both of the second quarters of 2024 and 2023 and $1.4 million in both of the first six month periods in 2024 and 2023. The impact of the legal settlement and related costs were $27 thousand in the first six months in 2024.         The Hackett Group, Inc. SUPPLEMENTAL FINANCIAL DATA (unaudited)  

Quarter Ended

June 28,

 

March 29,

 

June 30,

 

2024

 

 

 

2024

 

 

 

2023

 

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

$

42,262

 

$

40,892

 

$

43,632

 

Reimbursements

 

700

 

 

639

 

 

675

 

Revenue before reimbursements

$

41,562

 

$

40,253

 

$

42,957

 

  Oracle Solutions: Total revenue

$

23,045

 

$

21,729

 

$

20,775

 

Reimbursements

 

888

 

 

661

 

 

463

 

Revenue before reimbursements

$

22,157

 

$

21,068

 

$

20,312

 

  SAP Solutions: Total revenue

$

12,349

 

$

14,566

 

$

12,695

 

Reimbursements

 

172

 

 

160

 

 

323

 

Revenue before reimbursements

$

12,177

 

$

14,406

 

$

12,372

 

  Total segment revenue: Total revenue

$

77,656

 

$

77,187

 

$

77,102

 

Reimbursements

 

1,760

 

 

1,460

 

 

1,461

 

Revenue before reimbursements

$

75,896

 

$

75,727

 

$

75,641

 

  Revenue Concentration: (% of total revenue) Top customer

 

13

%

 

9

%

 

5

%

Top 5 customers

 

25

%

 

24

%

 

16

%

Top 10 customers

 

33

%

 

34

%

 

24

%

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

 

1,145

 

 

1,154

 

 

1,148

 

Total headcount

 

1,409

 

 

1,414

 

 

1,401

 

Days sales outstanding (DSO)

 

68

 

 

68

 

 

68

 

Cash provided by operating activities (in thousands)

$

13,719

 

$

2,792

 

$

7,714

 

Depreciation (in thousands)

$

941

 

$

942

 

$

806

 

Capital expenditures (in thousands)

$

884

 

$

948

 

$

1,062

 

  Remaining Plan authorization: Shares purchased (in thousands)

—

43

—

Cost of shares repurchased (in thousands)

$

—

 

$

1,055

 

$

—

 

Average price per share of shares purchased

$

—

 

$

24.34

 

$

—

 

Remaining Plan authorization (in thousands)

$

12,883

 

$

12,883

 

$

13,938

 

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

 

6

 

 

162

 

 

6

 

Cost of shares purchased (in thousands)

$

144

 

$

3,781

 

$

119

 

Average price per share of shares purchased

$

22.94

 

$

23.36

 

$

19.00

 

   

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240806487366/en/

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